Difference between ULIP vs Conventional Plans – Which one is better
If you cannot decide between opting for ULIP or conventional plans, then read our article to understand the difference between the two.
ULIP can be an attractive option to invest in provided you choose to invest in Kotak e-Invest Plan. ULIP is slightly different from traditional insurance plans in the market. Before we dig into comparing ULIP and traditional insurance plans, we must acquire some details about them.
ULIP
In a ULIP, a certain part of your money is used to offer life cover. The remaining amount gets invested in various investment tools. You will come across different funds, and you can allocate a part of your savings to any fund as per your choice. ULIPs can be a little risky, and the returns depend on the market.
Conventional Insurance Plans
Conventional insurance plans can be categorised into the following types:
- Term insurance plan: They are usually availed for a specific period. The policy period can range from 5 to 60 years. After your death, the nominee receives a huge chunk as a death benefit.
- Whole life insurance plan: These plans offer protection for a longer period. They are more expensive than a term insurance plan. You will be eligible for various benefits like maturity returns and tax deductions.
- Endowment plan: An endowment plan serves as a protective cover and also keeps a portion of your money as savings. You will receive a lump sum amount after the maturity of your policy.
Comparing ULIPs and Traditional Insurance Plans
| Criteria | ULIP | Conventional Insurance Plans |
| Purpose | Life cover and investment | Life cover |
| Returns | Savings get maximised through investments in multiple market instruments | No investments in the market, leading to fixed returns |
| The Right Time to Purchase | When you want to secure your and your family’s future while maximising savings | When you are only in need of a protective cover for a short-term or long-term period |
| Tax Benefits | Available | Available |
| Flexibility | They are highly flexible. You can pick the fund to invest in and specify how much you wish to allocate to each fund | Due to a lack of investment, no funds are available. As a result, you come across zero flexibility |
| Switching Options | According to market performance, you are allowed to switch from one fund to another | The choice isn’t available |
| Term | Suited for the long-term | Available for both long and short terms as per your financial goals |
| Security | Lack of security | Highly secure |
| Utilisation of Funds | The premium amount offers protective coverage, invests money in different market tools, and covers other expenses | The premium is used for protective coverage and related expenses |
| Lock-in Period | 3 to 5 years | The plans remain locked until the date of maturity |
| Withdrawal | You can withdraw a certain amount | The ability to withdraw varies according to the chosen plan |
Wrapping up
Before you decide to invest in Kotak e-Invest Plan, you must be aware of your financial needs and future goals. Hopefully, the detailed comparison will help you reach a conclusion.
Visit here to know more about Kotak Life ULIP Plan: https://www.kotaklife.com/online-plans/ulip-plan
