ULIPs or Mutual Funds: What should you choose?

Dec 05, 2017 | 2 years ago | Read Time: 2 minutes | By iKnowledge Team

You need your sunglasses during the summer. However, they are futile when the rains set in. An umbrella, on the other hand, can be used in both the seasons. Drawing parallels with the investment world, mutual funds are your sunglasses while unit-linked insurance plans (ULIPs) are your umbrella. So, let’s look why ULIPs are an all-weather option, while mutual funds address just one aspect of your life.

Defining ULIPs and mutual funds

Mutual funds are investment vehicles for parking your money in various asset classes. You could invest in equities, debt instruments, gold and other investment avenues using this vehicle. ULIPs, on the other hand, are investment instruments that split your premium for:

Some ULIP plans also give you the option to choose the weightage of equity, debt or any other available investing avenue as per your risk appetite. Thus, a ULIP could be considered as a mixture of a hybrid mutual fund and life insurance.

Advantages of mutual fund investment

  • There are numerous types of mutual funds that you can choose from
  • They offer appropriate diversification
  • Your funds are under professional management
  • Mutual funds are highly liquid
  • Equity-Linked Saving Scheme (ELSS), a type of mutual fund, offers tax benefits
  • Have the potential to counter inflation
  • Can truly explore the power of compound interest

Benefits of ULIPs

  • They provide insurance cover along with investment benefits
  • They, too, offer appropriate diversification
  • The funds are professionally managed at a lower cost
  • All ULIPs offer tax deductions up to Rs 1.5 lakh under Section 80C of the Income Tax Act
  • Some ULIPs offer rider options like accidental death benefits, critical illnesses and so on
  • Have the potential to counter inflation
  • Can truly explore the power of interest compounding
  • The returns are exempted under Section 10(10D)

The differentiating factors


Mutual Funds


Insurance benefits

Not available


Management Charges

Around 2.5%

Around 1.35%

Tax Deductions

Only with ELSS

On all ULIPs

Tax Exemptions on returns

Only long-term capital gains and dividends in the hands of the investors are exempted

All ULIP returns are exempted


The table suggests that ULIPs provide more benefits than mutual funds. They are a combination of different investment options, a fact that is unrivalled in the finance world. They can safeguard your family’s future, help in growing your wealth and be tax-friendly. Plus, the management charges are lower when you compare it to mutual fund investments. So, why wait? Invest in Aegon Life’s ULIP plans, today.

To know about AegonLife’s life insurance products, visit our home page.

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