The product structure ULIP and Mutual funds

• In terms of product structure, excluding risk coverage there is only a small difference between ULIP schemes and a Mutual fund scheme.
• Both market linked for returns, and they will both carry market risk.
• Based on the investor’s selected stock performance, his returns will reflect    exactly that in both cases.
• A fund manager will be responsible for running the scheme for both options.

Differences
Regarding regulation, Mutual Funds are regulated by the SEBI, while ULIPs are regulated by the IRDA. From an industrial point of view, while Mutual Funds focus on low costs and better performance as the USP, ULIP looks more at distribution reach as the USP.

Mutual Funds have very stringent transparency requirements compared to ULIPs, but this also ensures that the investor is availed as much information as necessary, unlike with ULIPs. Daily NAV are followed with Mutual Funds.

While keeping your premium the same a ULIP will allow you to increase your life cover. By reducing your investment allocation this is achieved. You cannot increase your life cover if you have a term policy purchased on top of a Mutual Fund. You would only have the option of purchasing a new policy, thus incurring new administration costs again.

In terms of costs of insurance, typically investing in a Mutual Fund will cost you less than it will cost for a general ULIP scheme. Mutual Funds are better suited for those that solely focus on investment and medium-term returns. ULIP products are better suited for long term investment bundled with insurance cover,

Summary:

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