ULIP vs SIP – Which investment option should you choose?

ULIP vs SIP – Which investment option should you choose?

Read on to know the difference between ULIP and SIP, and which is a better option for future investments.
 


 

FAQs

FAQs

Videos

Videos

ULIP plans

ULIP plans (Unit Linked Insurance Plans) are smart investment tools that combine life insurance with market-linked growth. You get the dual benefit of protecting your loved ones and building wealth over time. Whether you're saving for a dream goal or just want better returns than traditional plans, ULIPs offer flexibility, transparency, and control. And the best part? You can start small and scale up as you grow.

Read more Read less
  • Invest in ULIP, starting at Rs. 3,000/month*
  • Combine insurance and investment in one plan
  • Choose between equity, debt, or balanced funds
  • Option to switch funds based on market trends
  • Tax benefits under Section 80C and 10(10D)
Card background image

  • People’s trust in Bajaj

  • 10 million+

    Customers

  • 3

    Insurance partners

When it comes to long-term investing, many people often find themselves choosing between SIPs and ULIPs. Both are popular options, but they serve slightly different purposes. A SIP focuses purely on disciplined investing and wealth creation, while a ULIP combines investment with life insurance protection. So, how do you decide which one fits your financial journey better? The answer depends on your goals, time horizon, risk appetite, and whether you also need insurance cover. In this guide, we break down SIP vs ULIP in simple terms to help you understand how each works and choose an investment option that aligns with your long-term financial plans.


What is the difference between the terms of benefit?


Since SIPs help you invest in mutual funds or ELSS (Equity-Linked Savings Scheme) regularly, they allow you to grow your wealth steadily over a long period of time. In this regard, ULIPs offer an additional benefit. You can get life insurance cover, as well as enjoy the benefits of an investment.

Show More
Show less

What is the difference in terms of tax benefits?

Both SIPs and ULIPs allow you to claim deductions under Section 80C of the Income Tax Act. The maximum amount of deduction is Rs. 1.5 lakh. So, the amount you invest can be deducted from your taxable income up to this limit. However, the benefit is that ULIP of any amount from any insurance provider, fetches you a deduction. On the other hand, SIPs offer EEE tax benefits.
Show More
Show Less

Pro Tip

Create wealth and meet your financial goals with a ULIP investment plan, start investing from Rs. 3,000/month.

What is the difference in terms of charges?

The charges on ULIPs are as per the Insurance Regulatory and Development Authority’s rules. This means apart from the premium that you pay; the insurance provider is likely to add more charges such as premium allocation charge, administration charge, morality charge, fund management fees, etc. On the other hand, there is no extra charge on the SIP. You only have to pay the penalty if you exit your policy immediately after starting it before the holding period is over.
Show more
Show less

What is the difference in terms of returns?

ULIP's return depends on whether you have chosen a ULIP, which means to invest in debt funds, equity funds, or hybrid funds. However, this factor is easier to determine when it comes to SIPs. You can expect returns ranging from 12% to 15% on average. In some cases, returns go up to 20% to 22% as well.

What is the difference in terms of risk and lock-in period?

As both investments are made in the market, they carry significant risk. In terms of benefit at maturity, it is best to plan both these instruments keeping long-term gains in mind. Here, one big difference between the two is that SIPs are highly liquid. You can end your investment anytime you want. This is true unless you take an ELSS-backed SIP, in which you have to adhere to a lock-in period of 3 years. However, a ULIP comes with a 5-year lock-in period, you cannot break the policy before its maturity.


Based on these differences, your financial goals, and risk appetite, you can decide whether to opt for ULIPs or SIPs.


Conclusion


To sum it up, SIPs and ULIPs are designed for different financial needs, even though both help you build wealth over time. SIPs are ideal if you want flexibility, lower costs, and a straightforward investment option focused purely on returns. ULIPs, on the other hand, suit those who prefer a combined solution of investment and life insurance with long-term commitment. The right choice depends on what you value more—liquidity and simplicity or bundled protection with disciplined investing. By aligning your choice with your financial goals, time horizon, and risk tolerance, you can select the option that supports your long-term plans most effectively.

Frequently asked questions

Frequently asked questions

Is ULIP a better option than SIP for long-term wealth creation?

ULIPs can be suitable if you want long-term investment along with life insurance cover in one plan. SIPs work well for pure investing. The better choice depends on your goals, risk appetite, and need for insurance.

Should first-time investors opt for a SIP or a ULIP?

Beginners often find SIPs simpler and more flexible to start with. ULIPs can also work for new investors who want disciplined investing combined with life cover and are comfortable staying invested for the long term.

Show More Show Less

Bajaj Life Insurance image

Bajaj Life Insurance
HDFC Life image

Life Insurance Corporation of India image

Life Insurance Corporation of India

Related articles

Article 1

What is Term Insurance?

Sep 02, 2024

Read More

 Article 2

What is Life Insurance?

Read More

 Article 3

What is annuity, meaning and definition

Dec 23, 2024

Read More

 articleimage 4

What is a Pension Plan: Definition

Read More
View All

You are here

Related links

Disclaimer

*T&C Apply. Bajaj Finance Limited (‘BFL’) is a registered corporate agent of third party insurance products of Bajaj Life Insurance Limited (Formerly known as Bajaj Allianz Life Insurance Company Limited), HDFC Life Insurance Company Limited, Life Insurance Corporation of India (LIC), Bajaj General Insurance Limited(Formerly known as Bajaj Allianz General Insurance Company Limited), SBI General Insurance Company Limited, ACKO General Insurance Company Limited, HDFC ERGO General Insurance Company, TATA AIG General Insurance Company Limited, ICICI Lombard General Insurance Company Limited, New India Assurance Limited, Chola MS General Insurance Company Limited, Zurich Kotak General Insurance Company Limited, Star Health & Allied Insurance Company Limited, Care Health Insurance Company Limited, Niva Bupa Health Insurance Company Limited, Aditya Birla Health Insurance Company Limited and Manipal Cigna Health Insurance Company Limited under the IRDAI composite registration number CA0101. Please note that, BFL does not underwrite the risk or act as an insurer. Your purchase of an insurance product is purely on a voluntary basis after your exercise of an independent due diligence on the suitability, viability of any insurance product. Any decision to purchase insurance product is solely at your own risk and responsibility and BFL shall not be liable for any loss or damage that any person may suffer, whether directly or indirectly. For more details on risk factors, terms and conditions and exclusions please read the product sales brochure & policy wordings carefully before concluding a sale. Tax benefits applicable if any, will be as per the prevailing tax laws. Tax laws are subject to change. BFL does NOT provide Tax/Investment advisory services. Please consult your advisors before proceeding to purchase an insurance product. Visitors are hereby informed that their information submitted on the website may also be shared with insurers. BFL is also distributor of other third party products from Assistance service providers such as CPP Assistance Services Private Limited, Bajaj Finserv Health Limited. etc. All product information such as premium, benefits, exclusions, value added services etc. are authentic and solely based on the information received from the respective Insurance company or the respective Assistance provider company.

Note- While we have made all the efforts and taken utmost care in gathering precise information about the products, features, benefits etc. However, BFL cannot be held liable for any direct or indirect damage/loss. We request our customers to conduct their research about these products and refer to the respective products sales brochure and policy/membership wordings before concluding sales.