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Term insurance vs ULIP – Top 12 Major Differences

If you are looking at term insurance vs ULIP, it means you want to secure the financial stability of your family in your absence. Read now.

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Term insurance vs ULIP – Top 12 Major Differences

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  1. Term insurance vs ULIP – Top 12 Major Differences Term insurance and ULIP are two different types of life insurance products. While term insurance is a pure protection plan, ULIPs are investment cum insurance plans. Here are the top 12 major differences between term insurance and ULIP. 1. Purpose: The primary purpose of term insurance is to provide financial protection to the family in case of the untimely death of the policyholder. The primary purpose of ULIP is to provide both investment and insurance benefits. Premiums: Term insurance policies have lower premiums as they only provide life cover without any investment component. ULIPs have higher premiums as they provide both investment and insurance benefits. Coverage: Term insurance provides life cover for a specified term, usually ranging from 10 to 30 years. ULIPs also provide life cover for a specified term, but they also offer investment benefits that continue beyond the term of the policy. Investment options: Term insurance policies do not offer any investment options as they are pure protection plans. ULIPs offer various investment options such as equity funds, debt funds, and balanced funds. Flexibility: Term insurance policies are flexible, and policyholders can choose the coverage and term as per their requirements. ULIPs are also flexible, and policyholders can choose the investment options as per their risk appetite and financial goals. Returns: Term insurance policies do not provide any returns as they are pure protection plans. ULIPs offer returns depending on the investment options chosen by the policyholder. Surrender value: Term insurance policies do not have any surrender value as they do not have an investment component. ULIPs have a surrender value, which is the amount that the policyholder receives if he/she surrenders the policy before the end of the term. Tax benefits: Both term insurance and ULIPs offer tax benefits under Section 80C of the Income Tax Act. The premium paid towards both types of policies is eligible for tax deduction up to Rs. 1.5 lakh. Liquidity: Term insurance policies do not have any liquidity, and policyholders do not receive any benefits if they survive the policy term. ULIPs offer liquidity, and policyholders can withdraw their investment amount after the lock-in period. Charges: Term insurance policies have lower charges as they do not have an investment component. ULIPs have higher charges as they have investment components, including fund management charges, premium allocation charges, and mortality charges. Risks: Term insurance policies do not have any investment risks as they are pure protection plans. ULIPs have investment risks as the value of the investment depends on the performance of the market. Premium payment: In term insurance policies, the premium payment is done annually, half-yearly, quarterly, or monthly. In ULIPs, the premium payment can be done monthly, quarterly, half-yearly, or annually. In conclusion, term insurance and ULIPs are two different types of life insurance products with their own unique features and benefits. While term insurance is a pure protection plan with lower premiums, ULIPs offer both investment and insurance benefits with higher premiums. Policyholders should carefully consider their financial goals and risk appetite before choosing between term insurance and ULIPs. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Read More:Term insurance vs ULIP – Top 12 Major Differences

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