ULIP Vs Mutual Fund

If you thought Unit Linked Insurance Policies are similar to Mutual Funds and are alternative investment oppurtunities. You may be wrong.

Mutual Fund : - Pure investment.

ULIP :- Investment + Insurance.

Investors in ULIPs are allotted units by the insurance company and a net asset value (NAV) is declared for the same on a daily basis.

ULIPs are good only for people ready to invest for a longer period of time.

Normally mutual funds have 2.5% entry load, but fund charges are huge in case of ULIPs in initial years.

Eg :- LIC Money PLus takes 25-26% as expenses in the first year. This percentage starts reducing as years passes.

Note also that ULIPs generally remove your units as their Annual management charge and monthly charges. Mutual funds account for those in the NAV itself. Therefore, for the same dates, your real return on the ULIP would be lower than the figures mentioned, but on the Mutual funds would be the same

Personally I feel that if someone needs both insurance and investment.

Then he/she should take the combination of Term Insurance(pure insurance) + Mutual Funds instead of going through ULIP route.

Term insurance are quite cheap compared to other insurance in terms of benefit amount.
The money saved on premium can be invested in high growth mutual fund.

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