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In India, there are different types of life insurance policies , and each type of policy has its pros and cons. With so many options available, the insurance buyers, especially the first-time buyers, often get confused about the plans.If like many others, you too are wondering whether you must purchase a term policy or invest in a ULIP plan , you ought to know the difference between the two. Also Read: How Does A Term Life Insurance Work?
| Term Insurance | ULIP | |
| What is it? | As the name suggests, term insurance policy is a type of life cover that provides coverage for a specific duration. It is a pure protection policy that pays a death benefit in the event of a policyholder's death before the end of the term. But, if the policyholders survive the term there is no pay out. | Unit-Linked Insurance Plan is a unique insurance product that provides the dual benefit of life cover as well as an investment opportunity. A part of the premium paid towards the policy is used for protection, and the other part is invested in various investment instruments like bonds, debts, and equities to generate returns for the policyholder. On maturity of the plan, the policyholder is entitled to receive a sum assured and the fund value of the investment. |
| Premium | The premium for a term plan is the lowest among all insurance plans in the market and is affordable for all. | There are different charges associated with a ULIP, so the premium is higher than term insurance. |
| Financial Security | The term policy provides your family with full financial protection against mishaps. In the event of your unfortunate death before the end of the policy term, the insurer will pay the sum assured to the nominee. | If the event of your unfortunate death, as per the unit-linked insurance plan mandate, the insurer will pay the sum assured to the nominee along with the returns earned from the investment. |
| Tax Benefits | The tax benefit of investment in term insurance is covered under Section 80C of the IT Act. The premium you pay for the policy is considered as a deductible to a maximum limit of 1.5 lakhs. Also, under Section 10 (10D), the death benefit received by the beneficiary is fully exempted from taxes. | You are entitled to a tax rebate for the premium paid under Section 80C. Also, any payout received by the beneficiary is exempted from tax under Section 10 (10D). |
Which is Better - Term Policy or ULIP
If you are not sure, if Term Policy is better or ULIP, you must know that both serve a different purpose and you must choose the right insurance plan based on your specific requirement. If you are looking for a simple life protection plan with an affordable premium, Term Policy will suit your needs. But, if you are looking for a policy that provides valuable returns while securing your family, you can purchase ULIP. So, assess your needs and choose the insurance plan accordingly.
DISCLAIMER
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.