Which Is Better: ULIPs or PPF?
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Investment plans are the best way to plan your finances- not only for the present but also for the future. There are various types of investment plans available. While some focus on wealth creation, others focus primarily on tax-saving benefits. Unit-Linked Insurance Plans (ULIPs) and Public Provident Fund (PPF) are two such investment avenues. They both have certain advantages and best serve certain financial goals.
What are ULIPs?
Unit-Linked Insurance Plans (ULIPs) are insurance plans that also have an investment component. Therefore, a single plan serves the dual purpose of giving coverage and also, helps policyholders to invest in market-linked investment funds.
The premium paid to a ULIP is divided into the insurance and investment component. There are multiple choices available in terms of investment funds and the policyholder is free to choose among them.
What is PPF?
The Public Provident Fund (PPF) is a government-regulated savings scheme. The rate of interest is annually dictated by the government. It is one of the most stable investment instruments. The policy term is fixed at 15 years although it can be extended, on request, for another five years. It is a long-term investment fund that gives substantial returns on maturity.
Which is Better: ULIPs or PPF?
Take a look at the difference between the two types of investment instruments to understand which one might be better:
Parameter |
ULIPs |
PPF |
|
Facilities Available |
Investment plus insurance, that is, life cover, death benefit and more |
Purely an investment scheme |
|
Returns |
Depends on the choice of the market-linked fund, the risks associated with it and the contemporary market trends related to the fund |
Fixed rate of interest that is determined by the government and meted out every year |
|
Lock-in Period |
5 years |
Fixed policy term of 15 years and can extend up to another 5 years, on request |
|
Partial Withdrawal Facility |
After the lock-in period of 5 years |
Allowed after the 7th policy year |
|
Tax Benefits Available |
To be found under Section 80C of the Income Tax Act of India |
To be found under Section 80C of the Income Tax Act of India and the maturity amount is completely tax-free |
Final Verdict
Although much of the choice depends on your personal financial needs and circumstances, a ULIP might generally be considered a better option. This is because they provide insurance and its associated benefits along with investment opportunities. The risks may seem to be comparatively higher but it largely depends on your choice of investment fund. Moreover, ULIPs also have higher returns. For a more stable choice, investing in the PPF is better. They have mostly fixed returns.
You may also like to read:
Difference Between ULIPs And Endowment Plans
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.
