Why ULIPs are a better investment option than mutual funds

Investing ensures more creation of wealth to fulfill your life goals. Today, there are several investment tools available in the market for every kind of investor. As an investor, you should invest your money in high-return investment vehicles for your long-term financial security in the future. Although there are multiple investment tools like bank fixed deposits, RBI taxable bonds, mutual funds, and so forth, the new-age ULIP is an excellent option for investment.

Before purchasing a ULIP, let’s take a look below to understand why ULIPs are a better investment than mutual funds:

  1. It is a dual-benefit financial product

A ULIP policy is a market-linked product, which provides you with dual benefits. Under a ULIP policy, you are eligible to receive the benefits of investment and insurance, both in a single product. As a policyholder, you can not only offer financial security to your family but also ensure your participation in the capital markets. While ULIP insurance offers a death benefit to your nominees, a ULIP investment allows you to invest in equity funds based on your risk appetite. 

  1. It is a long-term investment

A ULIP plan is a long-term investment of five years. For gaining maximum benefits from the long-term investment, you should purchase a ULIP policy at an early stage of your life. Buying a ULIP plan when you are young lets you to reap the benefits of the power of compounding. With compounding, you can build a large corpus by the time you grow older, provided you keep a close eye on your ULIP performance. Moreover, a ULIP policy helps you to develop a regular and disciplined habit of investing. 

  1. It is flexible

A ULIP policy is the most flexible option of investment. Purchasing a ULIP policy allows in selecting between the two main types of ULIP funds based on your risk appetite as well as choose a premium payment term based on your convenience. 

  • Funds: You can select from equity funds and debt funds of a ULIP policy. Moreover, you can use the switching feature to shift between these two funds to secure your invested capital from the market fluctuations.


  • Premium payment term: 

Buying a ULIP policy means regularly paying the premium for receiving the benefits. As a policyholder, you should pay the premium every month or every year. Additionally, you can even select to pay the premium for a limited period. 

  1. It provides tax-saving benefits

Every investment tool might not allow you with tax-saving benefits. However, a ULIP investment provides tax-benefits under Section 80C and Section 10(10D) of the Income Tax Act, 1961. As a policyholder, you can claim a tax deduction on your taxable income up to Rs. 1,50,000. In addition to this, the death benefit provided to your loved ones for survival in your absence is tax-free under Section 10(10D) of the Income Tax Act, 1961. Your nominees can choose to receive this death payout either every month or annually. 

  1. It offers better returns

Many people invest in a ULIP policy with the primary aim to receive more returns. To achieve substantial ULIP plans returns, you can use the equity investment to your advantage. Although equity funds provide relatively high returns, you should invest in it based on your risk appetite. If you are unable to bear the market risks, you should not invest in equity funds since they are not risk-free. In that case, you should invest in debt funds as they are less-risky.

To sum up, a ULIP plan has gained popularity after the new regulatory rules announced by the Insurance Regulatory and Development Authority (IRDA). Although mutual funds might have been in the markets for long, a ULIP plan provides more benefits in the long run. Therefore, select the best ULIP plan in India based on your financial needs, investment goals, and risk appetite.