Term Insurance Plan, Mutual Fund, ULIP: Which One Is Better Investment Option

Investments are getting hyped up with the market growth and time. Investors of all levels are keen on investing in some kind of investment available in the market. ULIP, Term Plan, and Mutual Funds are the 3 low-risk investments, which are subscribed by a majority of investors across India and the world. Before moving, let's first clear this fact, insurance like Term Insurance Plans shouldn't be looked at as investment vehicles.

Term Insurance Plans

Insurance is a protection vehicle that helps you hedge yourself or your family against any financial losses, which may arise from uncertain and unexpected events. If you have dependents or are a single earning member, pure term insurance plans are appropriate life insurance for you. Taking an adequate amount of cover can help your family endure the financial shock caused by your unfortunate demise.

Term plans provide more coverage at lower rates, allowing you to obtain a life insurance policy worth crores for a little cost. Furthermore, add-on benefits such as income on disability, severe sickness, and premium waiver shield you from dangers such as income loss, among others. Your protection needs should be met with a protection vehicle such as term life insurance. Under section 80C of the Indian Income Tax Act, 1961, Term Insurance plans can avail a deduction of Rs 1.5 in a financial year. 

Mutual Fund

Mutual funds are a pure investment vehicle that invests your funds keeping an investment objective in mind. Mutual Funds offer you different categories and investment styles to choose from, and returns vary across categories. Mutual Funds are known for their flexibility. You can stop or pause, increase or decrease your SIPs anytime without any charge and withdraw your fund as and when you wish.

ELSS (Equity-Linked Saving Schemes) is one category of Mutual Fund with a lock-in period of 3 years, which offers great returns and tax benefits. Talking about tax benefits, ELSS Mutual Funds offer tax benefits under section 80C up to 1.5 lakh in a financial year, the fund comes with a lock-in period of 3 years. 

ULIP (Unit-Linked Investment Plan)

In contrast to Mutual Funds, ULIPs are both insurance and investment product packed into one. Whereas, ULIPs have a lock-in period of 5 years, and failing premium payments may result in policy lapse. As a result, your insurance cover will cease. ULIPs are generally suitable for the more risk-averse investors, and their return capability is lower than that of mutual funds. ULIP investment also offers tax benefits. ULIP investors can avail of tax under section 80C of the Indian Income Tax Act, 1961, with a maximum of 10% of the sum assured, and the policy is locked in for 5 years. 

Bottom Line

The decision on which investment scheme to pick is purely based on the investor's personal needs and choices, as each investment vehicle provides distinct benefits and has a varied lock-in duration. The information shown here provides a basic summary of the investing alternatives. Never hurry into an investment choice; instead, conduct thorough due diligence and study before making a final selection.