Term Insurance vs ULIP: Features and Benefits

Life insurance is not one-size-fits-all. Whether you are focused purely on protecting your loved ones or want to grow wealth while staying insured, the choice between term insurance and ULIPs (Unit Linked Insurance Plans) can shape your financial journey.

This guide simplifies everything you need to know — from coverage to cost, tax benefits, and long-term gains — so you can confidently choose the right plan for your needs.

Understand the core difference between term insurance and ULIPs

At first glance, both term plans and ULIPs seem similar — they offer life cover. But the difference lies in what else they offer beyond protection.

• Term insurance is a pure life cover plan — it is designed to protect your family financially if something happens to you.

• ULIPs go a step further — they combine insurance with investment in equity, debt, or balanced funds to grow your money over time.

Here’s how each plan works when it comes to life cover and financial security.

• Term insurance: Offers a large sum assured at very affordable premiums. It’s focused only on life protection and doesn’t have maturity benefits.

• ULIPs: Blend life cover with investment. In case of death, either the sum assured or the fund value (whichever is higher) is paid out.

• Customisation options: Term insurance plans are straightforward, while ULIPs let you pick investment funds aligned to your risk appetite — equity, debt, or balanced.

Need simple protection? Or flexibility in investments? Compare what works better for your life stage here → Check plans and get quote!

Premiums for ULIPs and term insurance vary depending on their structure and benefits. Term plans are cost-effective because they only offer life cover, making them ideal for those seeking pure protection. Conversely, ULIPs have higher premiums because part of the amount is allocated for investments.

• Term insurance: Offers maximum coverage for the lowest premium. Premiums remain constant throughout the policy term.
• ULIPs: Premiums are relatively higher as they include insurance and investment. The cost depends on fund selection, market performance, and policy charges.
• Budget-friendliness: For policyholders with limited budgets, term plans provide high coverage at a lower cost compared to ULIPs.

Both ULIPs and term insurance offer tax-saving advantages, but the scope differs based on their structures. Both plans allow tax deductions under Section 80C of the Income Tax Act. However, ULIPs also offer tax benefits on investment returns, making them attractive for wealth creation.

• Term insurance: Premiums are deductible up to Rs. 1.5 lakh under Section 80C. The death cover is tax-free under Section 10(10D).
• ULIPs: Premiums qualify for deductions under Section 80C. Additionally, returns and maturity payouts are exempt under Section 10(10D), provided conditions are met.
• Dual benefits with ULIPs: Policyholders gain tax savings on both the premiums paid and the returns earned on investment.

Choosing the right plan depends on your goals, risk tolerance, and how actively you want to grow your money.

• Term insurance: Ideal if you simply want to protect your family’s future at a low cost, without mixing investments.

• ULIPs: Great for those who want their insurance to also help grow wealth — like for children’s education, retirement, or future goals.

• Personalisation: Term plans are fixed and easy, while ULIPs offer flexibility in fund selection based on your comfort with risk.

Have long-term goals in mind? ULIPs can grow with you — explore growth-based plans now and get quote!

This is where the two plans truly diverge. Term insurance is purely protective, while ULIPs provide growth potential.

• Term insurance: Has no investment component. It’s a peace-of-mind plan offering your family a payout if the unexpected happens.

• ULIPs: Allow capital growth over time through market-linked investments. You can choose how much risk you’re comfortable with — equity for higher returns or debt for safety.

• Growth outlook: With long-term investing and compounding, ULIPs can help build a significant corpus alongside insurance.

• Looking to grow wealth and stay covered? Use ULIP return calculator to see potential gains over 10+ years → Check plans and get quote!.

If your main goal is affordable, high-value protection, then term insurance is your best fit. But if you're aiming to grow wealth alongside life cover, ULIPs offer dual benefits.

Take a moment to think about your current needs and future aspirations:

• Are you the sole earner in the family and want to secure their future at minimal cost? → Go for term insurance

• Do you want to build wealth for life goals while staying protected? → Consider a ULIP

Not sure what suits you best? Compare plans side by side and get personalised quotes instantly!

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