ULIP or Term Insurance - Which one is better for you?

Term insurance policy is a type of life insurance that pays a sum to your nominees in case of your death. The most important benefit of term insurance is that they have nominal premiums which are affordable and flexible. The duration for these policies can be from a year to a few decades. Therefore if you want to have an investment which is easy on your pockets and have a decent life cover, you can always select term insurance as your best friend.

Unit Linked Insurance Plans or ULIPs are  a type of life insurance that helps in safeguarding your family in times of needs along with investing your money so that it can grow in debt market and equity. The payout on these insurance is usually a mix of fund value and sum assured.

Term insurance is best for those who are looking to protect and secure their family and loved ones’ future at a nominal cost. It will also give you the benefit of claiming tax deductions under Section 80C of the Income Tax Act, 1961. Term insurance is best suitable for those who have recently taken a loan as they can buy term insurance that could be repaid in exchange for loans. This type of insurance is also useful for business owners.

ULIPs are advantageous for those investors who are looking to gain extra returns from their life insurance. This plan provides a detailed and much-needed portfolio diversification with only one investment. This kind of insurance not only ensures the safety of the family but also helps to grow your money by investing it in the equity market. ULIPs also enjoy the same benefits of tax returns as term insurance and get tax reduction up to Rs 1.5 lakh under Section 80C and tax exemption on returns under Section 10 (10D) of the Income Tax Act, 1961.

ULIPs are beneficial for those people who have taken plans at an early age as they can explore the potential of investments and compounding. Also, ULIPs provide better returns on investment, in the long run, making it suitable for middle-aged people who aim for long term returns.

Whether you go for ULIPs or Term Insurance plan, the main aim is to secure your loved one's future and both do the same job in a different way. Therefore it all depends on your needs and budget that you can install in any plans.