When it comes to life insurance, most buyers get stuck between Term Plans and ULIPs.
Both protect your family, but they work very differently - term insurance is pure protection, while ULIP
(Unit Linked Insurance Plan) combines life cover with market-linked investment.
Choosing the wrong one can either waste money or leave you underinsured.
This guide breaks down Term Insurance vs ULIP across coverage, cost, returns, and goals - so you can make
the right decision for your financial future in Hyderabad, Telangana.
Quick Comparison: Term Insurance Vs Ulip
| Feature |
Term Insurance |
ULIP (Unit Linked Insurance Plan) |
| Purpose |
Pure life cover |
Life cover + Investment combo |
| Premium |
Low (₹500-₹1,000/month) |
High (₹5,000-₹10,000/month) |
| Coverage |
₹1-₹5 crore |
10× annual premium (usually ₹10-₹50L) |
| Returns |
None (pure protection) |
Market-linked (equity/debt funds) |
| Risk Level |
None |
Moderate to high |
| Liquidity |
None |
Partial withdrawal after 5 years |
| Lock-in Period |
Not applicable |
5 years minimum |
| Tax Benefits |
80C + 10(10D) |
80C + 10(10D) (with limits) |
| Ideal For |
Protection-focused buyers |
Investors with risk appetite |
What Is Term Insurance
- Provides financial protection to your family if you pass away.
- No maturity benefit — pure risk cover.
- Extremely affordable (₹1 Cr cover for as low as ₹800/month).
- Perfect for income replacement, debt coverage, and family security.
What Is A Ulip (Unit Linked Insurance Plan)
- Combines life insurance and investment.
- Part of premium goes toward insurance, rest is invested in equity/debt funds.
- Returns depend on market performance.
- Best for long-term wealth creation if you understand investment risks.
Cost Comparison (For Hyderabad)
| Buyer Profile |
Term Plan Premium (₹/yr) |
ULIP Premium (₹/yr) |
Coverage (₹) |
| 30-year-old |
₹10,000 |
₹1,00,000 |
₹1 Cr vs ₹10L |
| 35-year-old |
₹12,000 |
₹1,20,000 |
₹1 Cr vs ₹12L |
| 40-year-old |
₹15,000 |
₹1,50,000 |
₹1 Cr vs ₹15L |
Verdict: For the same ₹1 lakh premium, a term plan gives 10× higher coverage.
Returns - Term Plan Vs Ulip
| Plan |
Returns |
Risk |
Liquidity |
| Term Plan |
None |
None |
No |
| ULIP (Equity) |
8-12% p.a. |
High |
5-year lock-in |
| ULIP (Debt) |
5-7% p.a. |
Low |
5-year lock-in |
When To Choose Term Insurance
- You want maximum protection at minimal cost.
- Your goal is family security, not investment.
- You already invest separately (e.g., SIPs, mutual funds).
- You have dependents, loans, or ongoing responsibilities.
When To Choose A Ulip
- You want combined life cover and investment.
- You’re comfortable with market-linked risk.
- You prefer a disciplined long-term savings plan (10-15 years).
- You want partial withdrawals for goals like education or retirement.
Local Insights For Hyderabad
- % of buyers preferring term plans: 68%.
- % preferring ULIPs: 12%.
- Avg. ULIP investment duration: 8 years.
- Most popular ULIP funds in Telangana: Equity Growth Fund, Balanced Advantage Fund, Debt Income Fund.
Tax Benefits: Term Plan Vs Ulip
| Section |
Term Plan |
ULIP |
| 80C |
Up to ₹1.5L deduction |
Up to ₹1.5L deduction |
| 10(10D) |
Payout tax-free |
Payout tax-free (if premium ≤10% of sum assured) |
| 80D |
Rider deductions |
Not applicable |
Why Term Plan Is Still The Foundation
Even if you choose ULIP or mutual funds later, term insurance should always come first — it ensures your
family’s future even if markets underperform.
ULIP can complement it, but it should never replace a pure protection policy.
PolicyBachat Tip
Combine both: Take ₹1 Cr term plan + small ₹50k ULIP for long-term savings.
You get protection + disciplined wealth creation - the smart hybrid approach.
FAQs
Is ULIP better than term insurance?
No - ULIP is for investment; term plan is for protection. Most people should start with term.
Can I get both term and ULIP?
Yes - ideal if you want security + market returns.
Do ULIPs give guaranteed returns?
No, returns depend on market performance.
Can I switch funds in ULIP?
Yes, most allow 3-5 free switches per year between equity/debt.
Can I withdraw from ULIP anytime?
Only after 5-year lock-in.
Do ULIPs have higher charges?
Yes, include mortality, fund management, and admin charges.
Which offers higher tax benefit?
Both qualify under 80C and 10(10D), but ULIP premium more than 10% of sum assured loses exemption.
Is ULIP good for short-term goals?
No - best for 10+ year horizons.
Can I stop ULIP midway?
Yes, but you will lose part of your investment due to surrender charges.
Can NRIs buy ULIPs and term plans in India?
Yes, both available online with digital KYC.
Customer Reviews
- “Clear explanation - now I know why term plan must come first.” - Vikram Nair,
Kochi
- “Loved the hybrid idea of term + ULIP.” - Sneha Reddy, Hyderabad
- “Finally understood difference between protection and investment.” - Rohit Patel,
Mumbai
- “PolicyBachat comparison made this easy.” - Anjali Menon, Bengaluru
- “Great article for financial beginners.” - Karan Sinha, Delhi
- “ULIP made sense only after reading this guide.” - Meera Deshpande, Pune
Featured