Difference Between ULIP and Mutual Funds | ULIP Vs Mutual Funds Comparison

Difference Between ULIP and Mutual Funds

Unit linked investment plan as well as mutual fund both are the investments options, but most of the investors are confuse which is more suitable for them. We have presented the Difference between ULIP and Mutual Funds in this page. Both contain various options which are quite different from one other. ULIPs are insurance cum investment product, offers both insurance & investment benefit whereas mutual funds is provides investment benefit. Let’s have a look for ULIP Vs Mutual Funds Comparison….!!!!!!

The main objective of insurance is to provide protection to the family members of policyholder in case of insurer death whereas investment in mutual funds builds your wealth as it provides high returns within short lock-in period. ULIP is the long time investment option which offers less liquidity. Mutual funds are short term investment, investor can acquire high liquidity.

Check Also – How To Choose A Best Mutual Fund

ULIP Vs Mutual Funds Comparison

Parameters ULIP Mutual Funds
Main Purpose Insurance cover along with investment benefits. Only Investment benefits.
Objective Long term plans, offers insurance and investment benefit. for investment benefits
Regulatory body IRDA SEBI
investment Return Low returns The return is higher than the hybrid ones.
When should you consider For protection it is safest option. If you want high returns

Most suitable option for you

Flexibility Flexibility is available  in this plan There is no flexibility
Tax benefit Available under Section 80C Under ELSS of Section 80C
Investment portfolio In this case portfolio is unknown portfolio is declared on a quarterly basis
Lock in period Minimum 3 – 5 years No lock in period.
Security No security No security
SIP Yes Yes
Switching options Permits investors to switch between the funds linked to the plan This option is not available
Additional benefits Additional loyalty benefits present There are no additional benefits
Ideal term Long term Short to medium term investment
Liquidity Less liquid More liquid

 Know About – How To Change Details In Mutual Fund

Difference Between ULIP And Mutual Funds

Risk Exposure

ULIPs are less risky product in the comparison of mutual funds as they are long term insurance plans. While on the other hand mutual funds are the short term investment. Mutual funds are of various types as Equity oriented mutual funds, Debt mutual funds, Hybrid funds or balanced funds, SIP mutual funds etc. A person should be more careful at the time of investment due to the nature of insurance policies.

Potential Of Returns

Mutual funds have various variety and it produce high interest rate on the short investment. Hybrid mutual funds are less risky than Equity oriented mutual funds and debt funds are less risky than hybrid mutual funds. ULIPs provide low interest rate as it offers short term investment plans. If you desire to earn maximum return by small investment MF is better option for you.

Lock-In Period

There are so many insurance companies are available in the market, define the lock-in period of insurance product. A policy holder cannot sell his policy before the lock-in period, decided by the insurance company and in case of MF, Most of the mutual funds don’t contain locking period, so a person can buy and sell mutual funds anytime. Some mutual funds has lock-in period of 3 years.


It is a facility availing the easiness with which you can redeem your investment and also we can consider it as the duration of the process of receiving back the investment after redemption. Mutual funds contain more Liquidity then Unit Linked Insurance Plan, so that they widely trade in the market.

Check Also – Top 5 Best Liquid Mutual Funds


One of the biggest advantages of mutual funds is that their charge is low. The management fee of mutual funds is characteristically 1 percent to 2 percent. While on the other hand Unit Linked Insurance Plan charges are high.

A person must remember the basic rules of investment i.e. never mix insurance with investment as they both contains differ services and benefits. ULIP as well as mutual fund both provides funds variety as equity fund, debt funds, income fund etc. investor should always keep in mind that higher is the risk, higher will be returns on investment.

Check AlsoTop 10 SIP Mutual Funds

ULIP is best option in terms of security but it provides minimum interest after the completion of maturity period. MF provides high interest within small locking period. Some mutual don’t contain any locking period that means you can anytime sell or purchase bonds. You can select investment either monthly or lump-sum. So you can decide which is most suitable for you, on the basis of above mentioned facts


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