Everything About SIPs vs. ULIPs

Purchasing investment and insurance plans are a great way to secure the financial interests of your future. You can fruitfully save up towards a bright future while earning at the same time. There are multiple such plans available, of which these SIPs (Systematic Investment Plans) and ULIPs (Unit-Linked Insurance Plans) are two of the most opted for investment choices.

SIPs and ULIPs come with different features and benefits. This is what also makes it difficult to choose between the two types of plans. Read on to find valuable insights on SIPs and ULIPs to make an informed investment decision according to your financial goals and risk appetite.

Also Read:- Reasons Why ULIPs Can Help You Save For The Long Term

First Off, What are ULIPs?

Unit-Linked Insurance Plans (ULIPs) are investment plans which also offer the benefits of a life cover. ULIPs help you invest your money in both equity and debt instruments via its fund options. This helps you gain valuable returns while securing the financial future of your family in your absence.

What are SIPs?

Systematic Investment Plans (SIPs) generally refer to mutual fund plans that help you efficiently invest your money at regular intervals so that you can benefit Rupee Cost Averaging and Power of Compounding. SLIPs allow you to start your investment journey with an amount as low as Rs. 100. You can invest via SIPs on a monthly, quarterly, semi-yearly, and yearly basis to create your investment corpus.

SIPs vs ULIPs

Moving on from the basic definitions, we now venture into what makes these two types of plans so different from each other. There are several points of differences and features including the types of returns these plans will bring to you. Here are some of the most essential ones. 

1. Nature of Investment

A ULIP allows you to create an investment corpus appreciating your wealth while securing the future of your family with a life cover. However, a SIP only allows you to invest money and grow your wealth. A SIP does not offer any insurance benefit.

2. Tax Benefits

Tax exemptions and benefits are available on both these types of plans. For a ULIP, you can avail of the tax benefit of up to Rs. 1.5 Lakh under Section 80C and a tax exemption on its proceeds under Section 10 (10D) of the Income Tax Act. For a SIP, tax exemptions are available only with an Equity-Linked Savings Schemes (ELSS) upto Rs. 1.5 Lakh under Section 80C of the IT Act.

You May Also Like to Read:- Benefits of Purchasing a ULIP

How Does A ULIP Work?

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.