Point Of Difference | ULIPS | Mutual Funds |
| Regulators | IRDA | SEBI |
| Primary Objective | Insurance + Investment | Pure Investment |
| Type Of Investment | Good for long term investors | Good for short to medium term investors |
| Flexibility | Limited Flexibility – can switch to funds offered by your policy company | Very Flexible – can switch to any fund available in the market |
| Entry Load | Huge entry load, from 5 to 40% | No or small entry load |
| Liquidity | Limited Liquidity, minimum 5 years of investment required | Very Liquid, Sell your MF anytime except ELSS |
| Tax Benefit | All ULIP investments are qualified for tax benefit under section 80C | Only ELSS investors are qualified for tax benefit under section 80C |
| Investment amount | Determined by the investor and can be modified later | Minimum investment amounts are determined by the fund house |
| Switching of Funds in portfolio | Investor can switch funds by paying switching fees. Like from liquid fund to equity fund etc. | Investors are not allowed to switch funds as your investment portfolio is managed by professional fund managers. |
| Charges | Higher charges | Low management fee |
| Expenses | High Expenses – As there is no upper limit determined by the insurance companies | Low Expenses – Upper limits for expenses is pre – set by the regulators |
| Portfolio disclosure | No legal requirement | Quarterly disclosures are mandatory |
| Transparency | Lesser transparency | Greater Transparency |
| Maturity Period | Normal maturity period is 5 to 20 years | No maturity or lock in period except for ELSS |
| Lock-In Period | 5 Years Lock-In Period | No Lock-In period except for ELSS i.e 3 years. |
| Life Cover | Yes | No Life cover |
| Premature Redemption | You can premature your policy by paying penalty . But if you redeem your investment in ULIP within 3 years of start of paying of premium, you would be at a loss. The administrative charges are quite high during the initial policy years. | If investor redeems his units before the lock in period (normally a year in case of non tax saving mutual funds) exit load has to be borne by the investor. Also you are not allowed to redeem your investments in tax saving mutual funds before 3 years. |
| Post Maturity | In ULIP you do not have the option of staying invested post-maturity. | You have the option of staying invested in the scheme even after maturity. |
| Nominee Receivables | higher of sum assured or fund value in case of death of insured. (In some policies both). 125% of the single premium paid in case single premium policy. | Nominee will receive the fund value. |
| Track Record | Limited track record as ULIPs are comparatively newer in market | Longer history or record of performance helps investors choose the right fund. |
| Risk Exposure | Relatively Less Risky | Relatively Risky |
| Return On Investment | Potential return on ULIP is low as risk exposure is low and there is a guaranteed sum assured value which will be paid in case of death of the insured irrespective of funds making money or not. | Potential return on Mutual funds is higher in hybrid mutual funds where risk exposure is higher. |
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