Choosing between a ULIP plan (Unit Linked Insurance Plan) and an endowment policy can be challenging, as both offer distinct benefits. However, understanding the key differences can help determine which one may provide better returns based on your financial goals.
What You Should Know About ULIPs
A ULIP plan is a financial product combining life insurance with investment. Your premiums are partly used for life cover and partly invested in equity or debt funds. The true meaning of ULIP lies in its dual benefit—providing financial security while growing your wealth through market-linked investments.
Some of the key features of ULIPs are:
- Market-Linked Returns: Returns are dependent on the performance of the chosen funds.
- Flexibility: You can switch between funds to optimise returns based on market conditions.
- ULIP Tax Benefit: Premiums paid are eligible for tax deductions under Section 80C of the Income Tax Act, and the maturity proceeds are tax-exempt under Section 10(10D).**
What You Should Know About Endowment Plans
An endowment policy, on the other hand, is a traditional life insurance plan offering a guaranteed sum assured along with bonuses. It focuses more on providing financial security than wealth creation.
Some of the key features of endowment plans are:
- Guaranteed Returns: Offers a lump sum on maturity, regardless of market performance.
- Bonuses: Participating policies may receive additional bonuses declared by the insurer.
- Lower Risk: Since returns are not market-linked, there is less risk involved compared to a ULIP plan.
Key Differences Between ULIPs and Endowment Plans
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| ULIP Plan
| Endowment Policy
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Returns
| Market-linked, potentially higher
| Guaranteed, relatively lower
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Risk
| Relatively high, depends on market performance
| Low, with guaranteed returns
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Flexibility
| High, fund switching available
| Low, fixed benefits
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What Offers Better Returns?
The potential for better returns is generally higher with a ULIP, thanks to its market-linked nature. However, the risk is also higher. If you are a risk-tolerant investor looking to grow your wealth while enjoying life insurance cover, a ULIP might be the better choice. Conversely, if you prefer guaranteed returns with low risk, an endowment policy could be more suitable.
Both ULIP and endowment policies offer unique advantages. While ULIPs provide the potential for higher returns through market investments, endowment policies offer guaranteed returns and financial security. Your choice should align with your financial goals, risk appetite, and investment horizon.
** Tax exemptions are as per applicable tax laws from time to time.
# Bonus rate may vary from time to time based on Company’s Investment Performance.
Disclaimers:
Unit Linked Insurance Products are different from the traditional insurance products and are subject to risk factors. The Premium paid in unit-linked life insurance policies are subject to investment risks associated with capital markets and NAVs of the units may go up or down, based on the performance of fund and factors influencing the capital market and the insured is responsible for his/her decisions. IndiaFirst Life Insurance Company Limited is only name of the Insurance Company and _________________ (UIN__________) is only the name of the Unit Linked Life Insurance contract and does not in any way indicate the quality of the contract, its future prospects, or returns. Please know the associated risks and the applicable charges from your Insurance Agent or the Intermediary or policy document issued by the Insurance Company. The various funds offered under this contract are the names of the funds and do not in any way indicate the quality of these plans, their future prospects and returns. For more details on risk factors and terms and conditions, please read the sales brochure carefully before concluding the sale.
IndiaFirst Life Insurance Company Limited, IRDAI Regn No.143, CIN: U66010MH2008PLC183679, Address: 12th & 13th floor, North [C] Wing, Tower 4, Nesco IT Park, Nesco Center, Western Express Highway, Goregaon (East), Mumbai – 400 063. Toll free No – 1800 209 8700. Email Id:customer.first@indiafirstlife.com, Website :www.indiafirstlife.com, Fax No. +91226570600. Trade logo displayed above belongs to our promoter M/s Bank of Baroda and is used by IndiaFirst Life Insurance Co. Ltd. under license. Adv. Ref. No.:_________.
BEWARE OF SPURIOUS/ FRAUD PHONE CALLS!
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IRDAI is not involved in activities like selling insurance policies, announcing bonus or Investment of premiums. Public receiving such phone calls are requested to lodge a police complaint.
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