Mutual Fund vs ULIP
ULIP or Unit Linked Insurance Plan is a combination of insurance and investment.
ULIP is an insurance plan which also invests in stocks and bonds to provide return benefits along with insurance protection.
Key things to know about ULIPs:
- A part of premium is used for insurance and the rest is invested in stocks/bonds.
- Tax exemption under section 80C or 80CC.
- Lock in period for a minimum of 5 years.
- ULIPs have higher fees and are less transparent as compared to mutual funds.
- Charges of surrendering before lockin period in ULIPs are quite high.
As an alternative to ULIP, investors can choose to invest in a term plan (insurance) and mutual funds separately.