There are various plans in insurance which helps to keep our portfolio diverse. It would be great to have both term and ulip in your portfolio. Now,in case if you are planning to buy only one of them, it is important to understand their features and ultimately you can make decision.
What is Term insurance
Term insurance is a pure protection plan. It means a life assured gets benefit only on death provided that status of policy should be in-force. Inforce means Life assured is paying premium time to time. Life assured does not received Death benefit once he stops paying premium. A life assured is granted with 30 days of grace period post due date, once he skips paying premium in grace period, his policy turns to lapse.
What is Ulip Plans
Unit linked plans is a combination of both insurance as well as investment. Aim of these plans is to create wealth along with life insurance cover. Part of your premium will go for life insurance and other part will go for investment i.e in equity,debt, balanced or any other fund. life assured receives higher of Sum assured or Fund value in-case of maturity or death.
Both Term plan and ulip plans offers different kind of advantages. Let us compare both plans on various parameters.
Difference between Term and Ulip
| Ulip Plan | Term Plan |
| Protection as well as Wealth Creation. | Pure Protection. |
| Part of premium is invested into funds. | Premiums are not invested in any fund |
| There are various charges in ulip such as mortality, admin, allocation, Fund management. | Term plan does not consist of any charges. |
| It is for people willing to invest for long term along with getting covered with Life Insurance. | It is for people who wants to secure their family in case of uncertainties. |
| 5 years Lock-in period. | No Lock-in period. |
| Partial withdrawal functionality is applicable post 5 years lock-in period. | Partial withdrawal functionality is not applicable. |
| Fund switching is allowed. | Fund Switching is not allowed. |
| Market dependent because life assured premium goes into particular fund. | No dependency on market. |
| Life insured gets dual benefit i.e In case of Death as well as maturity. | Life Insured gets only Death Benefit. |
| Premiums are comparatively higher than term plan due to various charges. | Premiums are cheaper. |
Overall, Both Term and Ulip plan have pros and cons. It is advisable to buy on the basis of your requirement. It would be great for your portfolio to have both the plans. It will keep your portfolio balance, which is the primary aspects of financial planning. Let us see, how it will keep balance. By having Term plan in your portfolio, You have covered yourself in case of unfortunate demise, for which you have to pay cheaper premium and by having ULIP in your portfolio, wealth is created which can be use for your child education or buying a property or any important event in life. Apart from wealth creation in ULIP, you are also covered for life.
Disclaimer :
This article is not sponsored and not meant for endorsing any particular insurance company. Please Check Terms and Condition of respective organization along with inclusion and exclusion before buying insurance policy.