What is the difference between ULIP and Mutual Fund?
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:
| Mutual Funds | ULIPs |
| regulated by the SEBI | are regulated by the IRDA |
| sold by un-tied agents | sold by tied agents attached to one particular insurer |
| Stricter transparency requirements comparatively | Lenient transparency requirements comparatively |
| Less flexible | more flexible |
Related posts:
- What is a Mutual Fund? Mutual Funds – The Logic behind Investing A mutual fund...
- What is ULIP? Unit Linked Insurance Plan (ULIP) • Unit Linked Insurance Plan...
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This post has 6 comments
June 18th, 2010
its not possible to increase the sum assured once the policy is in force…..
June 22nd, 2010
Dear Sir/Madam
I have various LIC Policies. I wants to know the status of that whether i have paid all the premium or the policies are active or not.
can i know the status of policies by net at home.
if yes than please tell me how.
Thanks & regards
usha
July 31st, 2010
Sir,
I have various lic policies. I want to know the current status means -primium paid, benifits,either loan available or not,policies are active or not.sometimes i entered the policy no. it doesnt reply .why it is so??
pls reply asap.
thanks
August 3rd, 2010
Hello
Dear
I want to invest some money in market plus.But i can’t know how can we invest directly in this scheme.
Kindly suggest me.
August 16th, 2010
Hi
My money back policy has lapsed due to non payment of the premium and I want to activate it. I am currently out of India. Could you please suggest what is a best possible solution to get it reactivated?
Thanks in advance..
September 5th, 2010
Many person wanna, Haw to my and my family life r secure,than u should have get any LIC Policy, and safe your life ……….