Difference between ULIP vs Mutual Funds

What Are ULIPs?

What Is a Mutual Fund?

Differences Between Mutual Funds and ULIP Plans


Here are some basic differences in ULIP plans vs mutual funds for an in-depth understanding.



Mutual Funds


ULIPs are a combination of insurance and investment. They help generate wealth and offer security.

It is a pure investment product that invests in varied securities. There is potential to generate considerable returns in the long term.

Regulatory Body

Insurance Regulatory Development Authority of India

Securities and Exchange Board of India

Tax Benefits

An investment made under ULIP qualifies for deductions under Section 80C of the Income Tax Act, 1961. Investors can claim a deduction of up to ₹1.5 lakh. Additionally, the death benefit under ULIP is completely tax-free.

Only ELSS (or Equity-Linked Savings Schemes) can get a tax deduction of up to ₹1.5 lakh under Section 80C of the Income Tax Act, 1961.

Policy Term

Long term

Can be long, short and medium-term.

Return on Investment

The ULIP returns can be dynamic as it deals with debt, equity, etc

Returns on mutual funds can vary depending on the scheme.

Lock-in Period

They have a lock-in period of 5 years

Most mutual funds do not have a lock-in period.


Premium allocation charges, administration charges, fund management charges, and mortality charges are incurred against ULIP

Professional management fees and operation fees are levied on mutual funds. Some mutual funds also incur exit load charges.

Risk Cover

Nominees are compensated the incurred sum when a policyholder passes away.

Investment is transferred to a nominee.

Moreover, prospective investors can check the above comparison between ULIP and mutual funds to make an informed decision.

Which Is Better: Mutual Fund or ULIP?

Frequently Asked Questions