ULIP vs ELSS

In the world of financial planning, investment options play a vital role in helping individuals achieve their long-term goals. Among the various investment avenues available, Unit Linked Insurance Plans (ULIPs) and Equity Linked Savings Schemes (ELSS) are two popular choices. Both ULIPs and ELSS offer the potential for wealth creation and tax benefits, but they differ in various aspects.

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ULIP Plans

Plan starting from ₹1,000/month
Save upto ₹46,800 in Tax under section 80C^{^}
Zero LTCG Tax^¶
In built life cover

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4.2 Crore

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7.7 Crore

Registered Consumer

Insurance Partners

4.2 Crore

Policies Sold

Disclaimer: #The investment risk in the portfolio is borne by the policyholder. Life insurance is available in this product. The maturity amount of Rs 1 Cr. is for a 30 year old healthy individual investing Rs 10,000/- per month for 30 years, with assumed rates of returns @ 8% p.a. that is not guaranteed and is not the upper or lower limits as the value of your policy depends on a number of factors including future investment performance. In Unit Linked Insurance Plans, the investment risk in the investment portfolio is borne by the policyholder and the returns are not guaranteed. Maturity Value: ₹1,05,02,174 @ CAGR 8%; ₹50,45,591 @ CAGR 4%. *Tax benefits and savings are subject to changes in tax laws. All plans listed here are of insurance companies’ funds.

Fund Name

AUM

NAV

Returns (in %)

3 Year

5 Year

10 Year

High Growth Fund

Max Life

AUM:8,482 Cr

8,482 Cr

NAV

119.99

1.59%

Returns

23.95%

Returns

31.9%

Highest Returns

Returns

20.47%

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Whole Life Mid Cap Equity Fund

Tata AIA

AUM:13,435 Cr

13,435 Cr

NAV

158.69

2.49%

Returns

21.08%

Returns

27.7%

Highest Returns

Returns

20.43%

Get Details

Virtue II

PNB Metlife

AUM:3,532 Cr

3,532 Cr

NAV

77.53

1.12%

Returns

17.59%

Returns

26.28%

Highest Returns

Returns

17.97%

Get Details

Accelerator Mid-Cap Fund II

Bajaj Allianz

AUM:6,452 Cr

6,452 Cr

NAV

86.49

1.27%

Returns

17.79%

Returns

22.67%

Highest Returns

Returns

16.96%

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Opportunities Fund

HDFC Standard

AUM:40,966 Cr

40,966 Cr

NAV

78.44

1.16%

Returns

15.75%

Returns

23.42%

Highest Returns

Returns

16.86%

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Fund Name

AUM

NAV

Returns (in %)

3 Year

5 Year

10 Year

Whole Life Aggressive Growth Fund

Canara HSBC Oriental Bank

AUM:869 Cr

869 Cr

NAV

93.59

0.82%

Returns

16.11%

Returns

20.41%

Highest Returns

Returns

15.83%

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Whole Life Stable Growth Fund

Canara HSBC Oriental Bank

AUM:266 Cr

266 Cr

NAV

61.92

0.32%

Returns

12.53%

Returns

15.66%

Highest Returns

Returns

12.78%

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Balanced Fund

Canara HSBC Oriental Bank

AUM:380 Cr

380 Cr

NAV

48.06

0.34%

Returns

11.49%

Returns

14.21%

Highest Returns

Returns

11.91%

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Asset Allocation Fund II

Canara HSBC Oriental Bank

AUM:341 Cr

341 Cr

NAV

31.32

0.18%

Returns

9.45%

Returns

12.98%

Highest Returns

Returns

11.36%

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Save N Grow Money Fund

Canara HSBC Oriental Bank

AUM:68 Cr

68 Cr

NAV

58.7

0.37%

Returns

8.69%

Returns

11.34%

Highest Returns

Returns

10.82%

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Fund Name

AUM

NAV

Returns (in %)

3 Year

5 Year

10 Year

Builder

Canara HSBC Oriental Bank

AUM:243 Cr

243 Cr

NAV

89.55

0.06%

Returns

6.87%

Returns

8.26%

Returns

8.91%

Highest Returns

Get Details

Whole Life Income Fund

Canara HSBC Oriental Bank

AUM:802 Cr

802 Cr

NAV

38.31

0.03%

Returns

6.22%

Returns

7.01%

Returns

8.18%

Highest Returns

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Debt Fund

Canara HSBC Oriental Bank

AUM:482 Cr

482 Cr

NAV

36.29

0.04%

Returns

5.92%

Returns

6.91%

Returns

7.93%

Highest Returns

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Conservative Fund

Canara HSBC Oriental Bank

AUM:233 Cr

233 Cr

NAV

55.4

0.09%

Returns

7.01%

Returns

7.98%

Highest Returns

Returns

7.92%

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Protector

Canara HSBC Oriental Bank

AUM:307 Cr

307 Cr

NAV

64.22

0.06%

Returns

6.07%

Returns

7.01%

Returns

7.89%

Highest Returns

Get Details

Disclaimer :
†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. The sorting is based on past 10 years’ fund performance (Fund Data Source: Value Research). For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in

What are ULIPs?

ULIPs are investment plans that combine investment and insurance into a single plan. When you invest in a ULIP, a part of your premium goes towards providing life insurance coverage, while the remaining amount is invested in a variety of market-linked funds. These funds can be equity-oriented, debt-oriented, or a mix of both. ULIPs offer policyholders the flexibility to switch between funds based on their risk appetite and market conditions.

What are ELSS Funds?

ELSS Funds, on the other hand, are a specific category of mutual funds that offer tax benefits under Section 80C of the Income Tax Act. ELSS funds primarily invest in equities, and they come with a mandatory lock-in period of three years, which means investors cannot redeem their units before the completion of this period. ELSS funds are known for their potential to deliver higher returns compared to other tax-saving investment options.

Key Differences between ULIPs and ELSS

Nature of Investment

ULIPs are a combination of insurance and investment, providing a life cover along with the opportunity to grow your money in the market. ELSS funds, on the other hand, are purely investment-oriented and do not provide any life insurance coverage.
Tax Benefits

Both ULIPs and ELSS offer tax benefits, but they operate differently. ULIPs provide tax exemption on the maturity amount under Section 10(10D) of the Income Tax Act. On the other hand, ELSS funds offer tax deductions up to Rs. 1.5 lakhs on the invested amount under Section 80C.
Lock-in Period

ULIPs have a lock-in period of 5 years, which means you cannot withdraw your investment before completing five years. ELSS funds have a shorter lock-in period of 3 years, making them more liquid compared to ULIPs.
Flexibility

ULIPs offer the flexibility to switch between funds based on market performance and the policyholder's changing financial goals. ELSS funds do not provide this switching option, and investors have to stay invested for the entire lock-in period.
Charges

ULIPs come with various charges, such as premium allocation charges, policy administration charges, fund management charges, and mortality charges. In contrast, ELSS funds have comparatively lower expense ratios, making them more cost-effective.

Advantages of ULIPs

Life Coverage: ULIPs provide life insurance coverage, ensuring financial security for your family in case of any unfortunate event.
Wealth Creation: The investment component of ULIPs has the potential to generate significant returns over the long term, helping you achieve your financial goals.
Tax Benefits: ULIPs offer tax-free withdrawals on maturity under Section 10(10D) and tax deductions on premium payments under Section 80C.
Flexibility: With the option to switch between funds, ULIPs enable you to align your investments with changing market conditions and risk appetite.
Loyalty Benefits: ULIPs offer loyalty addition as a reward for staying invested throughout the policy tenure. This bonus is granted based on the policy's terms and conditions, providing an additional benefit to loyal policyholders.

Advantages of ELSS Funds

Tax Savings: ELSS funds offer tax deductions up to Rs. 1.5 lakhs under Section 80C, reducing your taxable income.
Shorter Lock-in Period: The three-year lock-in period for ELSS funds provides more liquidity and allows you to access your funds sooner if needed.

Disadvantages of ULIPs

Charges: ULIPs come with various charges, which can affect the overall returns on your investment.
Long Lock-in Period: The five-year ULIP lock-in period may not suit investors looking for more liquidity.

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Disadvantages of ELSS Funds

Market Risk: ELSS funds invest in equities, which are subject to market fluctuations and can result in losses during bearish phases.
No Life Coverage: Unlike ULIPs, ELSS funds do not provide any life insurance coverage.

ULIP vs ELSS: Comparative Analysis

Particulars	Equity Linked Savings Scheme (ELSS)	Unit Linked Insurance Plans (ULIP)
Objective	ELSS is a professionally managed fund that also provides the advantage of diversified equity investments.	Offers the benefit of investment return along with tax relief with life coverage
Returns	Being market-linked, the returns depend on the scheme, but an investor can expect an approximate return of 12-14%.	The returns can vary because an investor can choose any combination of equity, debt, hybrid funds in his investment.
Lock-in period	3-years mandatory lock-in	5-years mandatory lock-in
Liquidity	High	Low
Applicable Charges	Fund management charges and exit load charges	Premium allocation charges, Policy administration charges, mortality charges, etc.
Regulator	ELSS funds are regulated by SEBI	ULIP plans are regulated by IRDA
Loyalty Additions	No such loyalty additions are applicable	Loyalty addition is offered under the policy for staying invested throughout the policy tenure. Loyalty addition bonus is given as per the terms and conditions of the policy.
Transparency	ELSS funds offer full transparency as the investors can track the fun regularly.	The funds are managed by the fund managers.
Risk	ELSS funds are high risk investments as the investment returns entirely depends on the market performance of the fund.	ULIP plans are high risk investment options as the returns entirely depend on the market performance of the fund. However, the plan offers also guaranteed life cover.

Disclaimer: Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by an insure

Conclusion

Both ULIPs and ELSS funds have their unique features and benefits. ULIPs offer the advantage of insurance coverage along with the potential for wealth creation, while ELSS funds focus solely on equity investments and tax savings. When choosing between the two, it's essential to consider your risk tolerance, investment horizon, and financial goals.

Remember to consult with a financial advisor l before making any investment decisions.

†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. The sorting is based on past 10 years’ fund performance (Fund Data Source: Value Research). For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
*All savings are provided by the insurer as per the IRDAI approved insurance plan.
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
+Returns Since Inception of LIC Growth Fund
¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.
~Source - Google Review Rating available on:- http://bit.ly/3J20bXZ
^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.