What is the Difference Between ULIP and SIP?

What Is ULIP?

What Is SIP?

What Are the Differences Between ULIP and SIP?

Although ULIPs and SIPs have some similarities in terms of investment frequency and instruments, they differ from each other in multiple parameters. The differences have been explained below:




Nature of plan

Combination of insurance and investment plan

Mutual fund investment strategy

Lock-in period

5 years

No lock-in period for open-ended funds other than ELSS, which comes with a lock-in period of 3 years.

Investment avenue

Invests in market-related securities that offer insurance coverage as well.

Helps to invest in a mutual fund scheme which deals with market related instruments, focusing on capital appreciation.


Comes with a specified investment tenure

Has no specific investment tenure. Individuals can stay invested for as long as they wish.


Can withdraw funds partially after completion of the lock-in period

Can withdraw funds whenever an investor wants; only ELSS investments have a lock-in period of 3 years


You have the option to add top-ups to your existing plan, switch the plan or adjust premiums.

The capital amount can be adjusted to gain returns accordingly.

Fees & charges

Includes multiple charges such as mortality charge, fund management fee, premium allocation fee and administration charge

Only entry and exit load charges are applicable in certain scenarios.

Additional benefit

After completion of a certain duration, you will earn loyalty rewards where additional fund units will be added.

No additional benefit is available.

Tax benefit

You can avail tax deduction benefits under Section 80C of the Income Tax on premium payments that do not exceed ₹5 Lakhs.

Only ELSS investments are eligible for a tax deduction of up to ₹1.5 lakh under Section 80C of the Income Tax Act.

Regulating Authority

Insurance Regulatory and Development Authority of India (IRDAI)

Securities Exchange Board of India (SEBI)

Which Is Better – ULIP or SIP?

What Are the Factors to Know Before Choosing Between ULIP And SIP?

FAQs About ULIP vs SIP

Can I stop my SIP anytime?

Yes, you can stop your SIP anytime if you feel like the mutual fund is not working for you or if you wish to explore other investment avenues. Please note that you will be required to file a cancellation form and submit it to the respective Asset Management Company (AMC) in order to stop your SIP.

What will happen if I miss out on my SIP payment?

If you miss your SIP payment three consecutive times, your AMC will most likely cancel your plan. Also, in case of insufficient balance, your bank might charge you a penalty.

What happens if I am unable to pay my ULIP premium?

Most likely, your insurance company will not charge any penalty if you are unable to pay your ULIP premium. However, you cannot withdraw from the fund before the lock-in period gets over. Also, as the grace period expires, the accumulated funds will be moved to Discontinued LIfe Policy and life insurance coverage will be discontinued.