Term insurance and ULIPs: The difference

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

Most of us are perplexed when we think of investing in an insurance policy. We are often confused between whether to go for term insurance and unit linked insurance plan (ULIP). Although, both insurance plans help meet a specific financial goal that you have planned, it’s always a good idea to compare them before deciding. So, let’s run over the rules for term insurance and ULIPs:

Term insurance

Term insurance policy gives a payout to your nominee/s, in case you pass away. The benefit of this type of insurance is that they have nominal premiums. The duration for such policies could be from a year to a few decades. If you are looking for an easy on pocket investment option with decent life cover, term insurance is a great pick.

ULIPs

ULIP plan is a type of life insurance that safeguards your family and also helps your money grow by investing in equity or debt markets, depending on your choice. The payout on such insurance is usually a combination of the fund value and/or the sum assured.

Why should you buy a term insurance?

This type of insurance is best suited for people looking to secure their loved ones’ future at a lower cost. It also gives you the added benefit of claiming tax deductions under Section 80C of the Income Tax Act, 1961.

This product is suitable for those who have recently availed a loan. That’s because you can get yourself a term insurance that could be repaid for paying the debt. Term insurance is also useful for business owners.

When to choose ULIPs?

ULIPs are beneficial for investors looking to gain extra returns from a life insurance. This is an instrument that provides a much-needed portfolio diversification with just one investment. Such insurance not only ensures that your family is safe, it also helps your wealth grow over time.

When it comes to tax-saving, ULIPs enjoy the same benefits as term insurance. They too get tax deduction up to Rs 1.5 lakh under Section 80C and tax exemption on returns under Section 10(10D) of the Income Tax Act.

ULIPs are beneficial for people starting early as they can truly explore the potential of compounding. Also, the investment part of ULIPs provide better returns in the long run. Thus, it is suitable for people in their mid-years aiming for long-term returns while securing their loved ones.

Bottom line

Whether you go for Aegon Life’s iMaximize – ULIP or iTerm Plus – term insurance, you are sure to secure your loved ones’ future.


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