ULIP VS SIP: Which is Better? 1

ULIP VS SIP: Which is Better?

A Brief Overview 

Investments are made considering varied goals that differ based on the investor in question. Two investment forms that are frequently flocked to are Unit Linked Insurance Plans (or ULIPs) and Mutual Fund Systematic Investment Plans (or SIPs). Read on to understand the differences between the two.

Understanding ULIPs

Serving the dual purposes of insurance and investment, ULIPs invest in stocks and bonds capable of generating returns, considering the prevailing market conditions. Those supporting ULIPs do so as they allow for wealth creation over long periods. They allow for fulfilling long-term financial goals, including funding a child’s education or marriage.


Predetermined premiums must be paid to invest in a ULIP, which can be asked for monthly, quarterly, or yearly. These premiums are invested in various instruments, including stocks and bonds. The performance of the market alters the value of the fund. Should the policyholder die while the policy is active, their beneficiary is paid the fund value or sum assured – whichever is higher. Otherwise, the available fund value is produced when the plan matures.

Understanding Mutual Fund SIPs

Mutual funds are popular investment options in which money paid by investors is pooled into a fund, which is collectively used to invest in a variety of instruments based on the choice of the fund manager. Mutual funds exist in various formats (equity mutual funds, debt mutual funds, hybrid funds), and their mode of payment may vary, i.e., they may exist as SIPs or prices can be made in a lump sum.

SIPs allow investors to invest in a fixed amount directed to the mutual fund of their preference regularly. The installment required to be paid can be as modest as INR 500. The frequency with which these installments are required to be paid can vary and range from weekly to yearly. SIPs are ideal for first-time investors as they are flexible. Investing in an SIP is viable as it allows investors to meet their financial goals and accumulate a corpus over a long-time frame.


As established in the previous two subheadings, each investment tool has benefits when considering this argument. However, they differ in several parameters.

  • Investment Goal—For starters, ULIPs serve investment and insurance goals, whereas SIPs only serve investment goals.
  • Investment Tenure – Next, investment tenures for ULIP require premiums to be paid, keeping in mind the term for the plan, whereas SIPs don’t have a fixed tenure and are invested so long as the investor desires.
  • Lock-in Period – Lock-in periods applicable for ULIPs amount to 5 years, whereas they are three years for SIPs.
  • Charges – ULIPs involve multiple accounts ranging from premium allocation and fund management fees to administration and mortality charges. Conversely, SIPs only have entry and exit load charges, which are applicable in limited cases.

Concluding Thoughts 

Investors must consider their financial profiles before considering which investment tool works best. To have a more comprehensive understanding of the differences between the two forms of investment, head on over to Finserv MARKETS.


I am a writer, financial consultant, husband, father, and avid surfer. I am also a long-time entrepreneur, investor, and trader. For almost two decades, I have worked in the financial sector, and now I focus on making money through investing in stock trading.