Term Insurance Plan, Mutual Fund, ULIP: Which One Is Better Investment Option

In order to build a financial corpus, people invest in different instruments. Some of the most popular options are mutual funds, ULIPs, etc.

In this article, we will discuss which is a better option between term insurance, mutual funds, and ULIP.

Every person wants to build a huge financial corpus. Therefore, they look for investment options that can help them achieve their goal. Thus, a lot of people prefer popular instruments like mutual funds, ULIPs, and term plans. While mutual funds and ULIPs are great options, term plans aren’t an investment instrument.

Let’s take a look at these options and how they can help the investors-

Unit-Linked Insurance Plan (ULIP)

A ULIP policy is a unique product as it offers the benefits of insurance and investment. Primarily, the premium paid is used for two purposes.

  • One part is allocated towards life cover.
  • The other part is allocated towards different instruments like equity and debt funds.

Benefits of ULIPs

  • Life Cover

One of the reasons to invest in ULIP is life cover. The nominees can receive the death benefit in case the insured person dies during the policy term. Hence, it can ensure the financial protection of the policyholder’s family.

  • Flexibility

The policyholder has the flexibility to choose between different investment options. He/she can choose the option based on the risk appetite.

  • Helps in Building a Financial Corpus

The policyholders can receive returns based on the options chosen by them. Hence, ULIPs are a great option to build a financial corpus.

Term Insurance

Term insurance isn’t an investment product. It is a policy that can provide financial protection against an unfortunate event.

If the insured person passes away during the tenure, then his/her nominees can receive the life cover amount. Therefore, term insurance can offer the policyholders’ family financial security.

Benefits of Term Insurance

  • Life


Life cover is the most important benefit that term insurance offers. In case of an unforeseen event like the death of the insured person, his/her nominees can receive the life cover amount. This amount can be used by them to meet their future and regular expenses.

  • Tax


Another benefit of term insurance is the tax benefit. The premiums paid are eligible for a tax deduction. Under Section 80C, the premiums that the policyholders pay can be claimed as a tax deduction up to Rs. 1.5 Lakh.

  • Add-Ons

The policyholders can also buy add-ons to get more security from their plan. There are various add-ons that can be purchased by paying additional premiums. Some of the most common add-ons are accidental death benefit, critical illness cover, etc.

Mutual Funds

Mutual funds are one of the most preferred options by many. They have the potential to provide the investor with huge returns. Primarily, there are two types of mutual funds- equity mutual funds and debt mutual funds.

Investors can invest in the funds based on their risk appetite. High-risk investors can opt for equity mutual funds to gain higher returns. However, investors who don’t want to take a lot of risk, should opt for debt mutual funds.

Benefits of Mutual Funds

  • Higher Returns

Mutual funds are a great investment option to earn high returns. For instance, equity mutual funds invest in the stock market. Therefore, they can provide investors with significant returns.

  • Diversification

Mutual funds allow investors to diversify their portfolio. As there are various types of mutual funds, investors can allocate their money across different funds in order to earn high returns while building a stable portfolio.

For instance, an investor has equity and debt mutual funds in his/her portfolio. If the stock prices in the portfolio falls, then the assets in the debt funds can reduce the losses.

  • Variety

    of Options

There are a number of mutual fund options with different investment objectives. Hence, it can be easy for an investor to select the right fund that suits his/her objectives.

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