Where to Invest- Mutual Funds or ULIPs?

People go for investments for multiple reasons: high returns, tax benefits, future plans, contingency funds. With a lot of investment plans gaining popularity, investors can choose the one that best aligns with their interests and financial plans and reap dividends.


ULIP or the Unit Linked Insurance Plan, is an investment vehicle cum insurance plan. ULIP provides flexibility to switch between equity, debit, money market and hybrid. ULIP investment is divided into two parts, one out of which is earmarked for insurance and the other for investment portfolio. Investors can switch between different plans without any hassles. There’s no cap on ULIP investments but tax benefits can be availed only for an investment up to Rs. 1.5 Lakhs. Returns on ULIP are tax-exempt under section 10D of the IT Act, and it comes with a lock-in period of 5 years. What attracts investors towards ULIP is its flexibility to switch investment modes and insurance inclusion.

Mutual Funds

Mutual Funds mean a common pool with money from different investors. The corpus is invested in a diverse portfolio across equities, debts, liquid funds etc. Since it’s completely market-link, mutual funds offer high returns but risk is higher as well. Mutual funds are of different types including ELSS (Equity Linked Saving Scheme) which comes with a lock-in period of 3 years. Other mutual funds don’t have any lock-in period. No fund management charge is levied in mutual funds as well.

ULIP vs Mutual Funds

Parameter ULIP Mutual Funds
Policy Purpose Investment returns + insurance coverage Investment with high-returns


Long-term investment for wealth enhancement and insuring your family. Short to long-term investment aimed at high returns and financial goals
              Regulator Insurance Regulatory and Development Authority of India (IRDAI). Security and Exchange Board of India (SEBI).

Tax Benefits

Eligible for tax deductions under 80 C up to Rs. 1.5 Lakhs, and tax-exempt returns under 10D. No tax deduction in mutual funds except ELSS, which allows exemption of over Rs. 1.5 Lakhs under Section 80 C.



Investors can freely switch between different modes mentioned in the plan such as equity, debt, hybrid etc. Investors can switch between different funds in a mutual fund, however they have to take in account exit loan and capital gains tax.
Lock-in Period 5 years No lock-in period
Fund Management Charges                1.35%


Cover Life-time insurance cover No cover plan


Mutual funds offer higher returns, but ULIP comes with the benefit of relatively lower risk and insurance coverage. ULIP has a lock-in period of 5 years, while there is no lock-in period in mutual funds. If you are looking for a long-term plan with lifetime insurance then you can explore ULIP vs Mutual Funds and choose the one that best aligns with your financial goals and priorities.


Investment plans offer multiple benefits, but it’s essential to select the right investment plan keeping in mind priorities and financial goals. Both ULIP and Mutual Funds come with their unique set of advantages. You can go through ULIP vs Mutual Funds and then decide which is more feasible for you. If you are looking to invest in either ULIP or Mutual Funds, check out some of the most attractive plans on Finserv MARKETS.