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Get Market-Linked Returns with Tax Benefits$




* T&C apply | BJAZ-WB-EC-04728/23


$Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.

Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116.

$Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.

Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116.

The Differences between ULIPs and Endowment Plans

ULIPs and endowment plans are two of the many investment options available for individuals looking for long-term wealth creation. However, many individuals seem to find it tough when it comes to understand the differences between these two types of investments. That’s something that we’re going to be addressing in this article. But before we take a look at the differences, here’s something for those individuals who are wondering ‘what is a ULIP?’

A Unit-Linked Insurance Plan (ULIP) is an insurance cum investment vehicle that allows you to invest in various types of market-linked funds such as equity or debt and provides you with a life cover. In a way, ULIP combines the elements of both investment and insurance into one. The life insurance coverage that a ULIP offers ensures that the policyholder’s family receives financial assistance in the event of the policyholder’s death. The investment component, on the other hand, ensures that the policyholder gets to create wealth by investing in market-linked funds, which is paid out to them on maturity.

Okay so, what is a traditional endowment plan then? Here’s some information that can help you out.

An endowment plan is basically a life insurance policy that combines life cover and savings element. It is for this reason that endowment plans are also referred to as savings plans. An endowment plan comes with both death benefits and maturity benefits. If the policyholder happens to survive till the end of the plan’s tenure, the premiums that they paid up until that point including the returns that it generated are paid out as maturity benefits. In participating plans, along with the lump sum amount, the policyholder will receive a bonus too. In non-participating plans, the benefit is guaranteed at the time of policy inception itself.


ULIPs vs Endowment Plans


Now that you’re clear on what is a ULIP and an endowment plan, let’s take a look at the differences between them both.

1. Returns

In a ULIP, you invest in market-linked funds such as equity funds or debt funds or a combination of both. And so, the returns that you get to receive from it would be dependent on the performance of the markets.

In the case of an endowment plan, the returns that you receive are generally guaranteed. And depending on the type of endowment plan, you also stand to receive bonuses.

2. Lock-in period

There is a mandatory lock-in period of 5 years in the case of ULIPs. During the lock-in period, withdrawals are not permitted. That’s not all. Even if you surrender or discontinue the ULIP midway during the lock-in period, the fund value, if any, would be paid out to you only after the lock-in period.

An endowment plan, on the other hand, has no such lock-in periods. This effectively means that you can surrender the policy at any time before the maturity date and receive the surrender value if any, immediately.

3. Level of flexibility

ULIPs offer a lot of flexibility to the policyholder. You get to choose the type of funds that you wish to invest in. However, that’s not all. ULIPs also allow you to switch funds at any point in time. And so, if you feel that the market hasn’t been performing up to your expectations, you could choose to switch from equity to debt.

An endowment plan is also quite flexible, but not as much as a ULIP. Traditional plans don’t offer the flexibility of choosing your investment, but they help you have a balanced investment portfolio

4. Risk

Since ULIPs essentially invest in market-linked funds such as equity and debt funds, the risk that you take on tends to be slightly on the higher side. However, the returns may also be higher depending on the performance of the capital market than traditional forms of investment options.

The risk factor with respect to endowment plans is little to none. They offer guaranteed returns irrespective of the performance of the market.

5. Performance tracking

In a ULIP, you can easily track the performance of the funds that you invested in by monitoring its net asset value or NAV.

In the case of an endowment plan, you get an intimation each year stating how much bonus has been accrued in your policy, if applicable.




As you can see, both ULIPs and endowment plans differ quite a bit from one another. If you’re an individual who is looking for an investment avenue as well as an insurance cover, you may choose from the available options of endowment policies or ULIP. If you’re wondering how to invest in ULIPs, the process is easy and simple. You can invest in ULIPs online today, thanks to the digitization of insurance. However, if you’re a more conservative investor who prefers to receive guaranteed returns with little to no risk and a life cover, an endowment plan could be considered.


#Survey conducted by brand equity – Nielsen in March 2020

~Tax benefits as per prevailing Income tax laws shall apply. Please check with your tax consultant for eligibility.

**Past performance is not indicative of future performance.

The above information is for general understanding and is meant to educate the general public at large. The reader will have to verify the facts, law and content with the prevailing tax statutes and seek appropriate professional advice before acting on the basis of the above information.

In this policy, the investment risk in investment portfolio is borne by the policyholder. Investment in ULIPs is subject to risks associated with the capital markets. The policy holder is solely responsible for his/her decisions while investing in ULIPs. The views stated in this article is not to be construed as investment advice and readers are suggested to seek independent financial advice before making any investment decisions. For more details on risk factors, terms and conditions please read sales brochure & policy document (available on carefully before concluding a sale.