ULIP vs Mutual Fund: Which is Better?
A comprehensive comparison to help you choose the right investment for your financial goals in 2025.
Quick Verdict
Choose ULIP if:
- You need life insurance coverage
- You want tax-free maturity returns
- You can commit for 10+ years
Choose Mutual Funds if:
- You want pure wealth creation
- You prefer lower charges
- You need flexibility to exit
Detailed Comparison
| Feature | ULIP | Mutual Fund |
|---|---|---|
| Nature | Insurance + Investment | Pure Investment |
| Life Cover | Yes (10x annual premium) | No |
| Lock-in Period | 5 years mandatory | No lock-in (except ELSS: 3 years) |
| Expense Ratio | Higher (1.35% - 3%) | Lower (0.5% - 2%) |
| Tax on Investment | Section 80C (up to ₹1.5L) | ELSS only (Section 80C) |
| Tax on Returns | Tax-free under 10(10D)* | LTCG taxed above ₹1L |
| Transparency | Less transparent | Highly transparent (daily NAV) |
| Flexibility | Fund switching allowed | Exit anytime (except ELSS) |
| Minimum Investment | ₹1,000 - ₹2,500/month | As low as ₹100/month |
| Best For | Insurance + Tax-free returns | Pure wealth creation |
*Tax-free under Section 10(10D) subject to conditions. Premium should not exceed 10% of sum assured.
Calculate Your ULIP Returns
Use our calculator to see how your ULIP investment could grow. Toggle "Include Charges" to see the impact of ULIP fees.
Your investment will grow for 5 additional years without new contributions.
Deduct typical ULIP fees from calculation
Total Invested
₹12,00,000
Maturity Value
₹72,16,099
Wealth Gained
+₹60,16,099
(+501%)Investing ₹10,000/month for 10 years, then staying invested for 5 more years
Growth Projection
Understanding the Difference
What is ULIP?
Unit Linked Insurance Plan (ULIP) is a hybrid product that offers both life insurance coverage and market-linked returns. Part of your premium goes towards life cover, while the rest is invested in funds of your choice (equity, debt, or balanced).
What is a Mutual Fund?
A Mutual Fund pools money from multiple investors to invest in stocks, bonds, or other securities. It's a pure investment product with no insurance component, managed by professional fund managers.
Returns Comparison
Historically, equity mutual funds have delivered 12-15% CAGR over long periods, while ULIP equity funds have given 10-14% returns. The difference is primarily due to higher charges in ULIPs. However, when you factor in tax-free maturity for ULIPs, the effective returns can be comparable for long-term investors.
The Verdict
If you need life insurance and want tax-efficient returns, ULIPs can be a good choice for long-term goals (10+ years). For pure wealth creation with flexibility, mutual funds (especially SIP in index funds) are generally more efficient. Many financial advisors recommend keeping insurance and investment separate - term insurance + mutual funds - for optimal returns.