ULIPs vs Mutual Funds

Unit Linked Insurance Policies (ULIPs) as an investment avenue are closest to mutual funds in terms of their structure and functioning. As is the case with mutual funds, investors in ULIPs are allotted units by the insurance company and a net asset value (NAV) is declared for the same on a daily basis.

Similarly ULIP investors have the option of investing across various schemes similar to the ones found in the mutual funds domain, i.e. diversified equity funds, balanced funds and debt funds to name a few. Generally speaking, ULIPs can be termed as mutual fund schemes with an insurance component.

However it should not be construed that barring the insurance element there is nothing differentiating mutual funds from ULIPs.

ULIPs vs Mutual Funds

	ULIPs	Mutual Funds
Investment amounts	Determined by the investor and can be modified as well	Minimum investment amounts are determined by the fund house
Expenses	No upper limits, expenses determined by the insurance company	Upper limits for expenses chargeable to investors have been set by the regulator
Portfolio disclosure	Not mandatory*	Quarterly disclosures are mandatory
Modifying asset allocation	Generally permitted for free or at a nominal cost	Entry/exit loads have to be borne by the investor
Tax benefits	Section 80C benefits are available on all ULIP investments	Section 80C benefits are available only on investments in tax-saving funds