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    Understand the Difference Between Term Insurance vs ULIPs

    Difference Between — Term Insurance vs ULIPs

    Last Updated On 26-09-2023

    It is generally advised to never mix “insurance with investments” however, every financial product is designed to address specific requirements and comprises both pros and cons. That gives birth to a common debate in financial planning — choosing between term plan vs ULIP.

    Let’s understand the difference between term insurance and ULIP to make an informed financial decision.

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    What is Term Insurance?

    Term insurance is the most basic life insurance policy that offers financial protection to the policyholder’s loved ones in the unfortunate event of their death. To avail of this policy, an individual is expected to pay a monthly premium determined by factors such as the age of the applicant, their health, the type of cover chosen, policy tenure, etc.

    Understanding what is term insurance is essential for every working professional with dependents who would suffer in their absence. Generally, term insurance premiums are the lowest as compared to other insurance.

    What is ULIP?

    Unit Linked Insurance Plans (ULIPs) offer the combined benefit of insurance and investment. The difference between ULIP and term plans is that in ULIP, the premium is split into two sections. One part is the premium for insurance, and the second part is invested in bonds, equities, loans, or hybrid funds.

    When the policy concludes, one is entitled to either the sum assured or the fund value of the unit-linked investments. However, for a more rounded understanding of what is ULIP , it is advised to look into the various types of ULIP plans that can be customized to meet specific financial goals.

    Let’s delve into the difference between term plans and ULIP to help make an informed financial decision.

    Difference Between ULIP and Term Plan

    The term plan vs ULIP debate makes it challenging to determine which one would be a suitable option for an individual. Since both these products are insurance offerings, determining the difference between term insurance and ULIP becomes important for making a financial decision.

    Here are the key points of difference between term plan and ULIP:

     Term Insurance ULIP
    Exclusively an insurance product Combination of insurance and investment
    Premiums are not invested A part of the premium is invested in the market
    Recommended for every working professional with dependants Recommended for long-term investors who want to invest in the capital market
    It only comprises the death benefit Since it is a market-linked investment, the returns depend on the market conditions and the types of funds chosen
    The premiums are exclusively meant for morality charges for providing life protection ULIPs are hybrid products that have a variety of fees associated with them. These include fees for premium allocation, policy administration, fund management,
    mortality fees, switching fees, and more.
    Term plans can be customised with additional riders to enhance the basic cover ULIPs can be customised to meet specific financial goals, such as buying a house or securing college funds, etc.
    No lock-in period exists. To maintain coverage for the specified term, premiums must be paid. Comes with a five-year lock-in period

    While weighing the pros and cons of term plan vs ULIP, noting the difference between term insurance and ULIP comes in handy. This way, you can compare your financial goals and choose a policy that best helps you meet them. However, if you were to choose only one from the term plan vs ULIP, let’s see which one would be best for you in a given situation.

    How to Choose Between ULIP and Term Insurance?

    Now that we know what is term insurance and what is ULIP, it is time to determine which one would be a suitable policy for you.

    Working professionals with financial dependants such as senior parents or spouses and children can invest in term insurance. This is because if something were to happen to the sole breadwinner of the family, the dependents would have no financial support to rely on.

    On the other hand, investors who seek funds at the end of the policy maturity period can opt for ULIPs. Since it offers dual benefits of life insurance with investment, investors have an opportunity to get returns at the end of the policy term.

    To make the choosing easier, browse through PNB MetLife’s insurance plans , and see what they offer.


    After analyzing the difference between term plan and ULIP, it is advised that investors don’t choose one over the other as both policies serve distinct purposes. Including these products in your financial plan ensures that you secure your financial future and the life of your loved ones appropriately.


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    What is more cost-effective: term insurance or ULIPs?

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    Term Insurance is usually more cost-effective, providing higher coverage for a lower premium compared to ULIPs.

    Which is better for long-term goals?

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    ULIPs can align with long-term goals due to investment potential, while term insurance provides pure protection. Consider your needs to make an informed decision.

    Does term insurance have a maturity benefit?

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    Term Insurance doesn't provide a maturity benefit; it focuses on providing a payout in case of the policyholder’s demise.


    The aforesaid article presents the view of an independent writer who is an expert on financial and insurance matters. PNB MetLife India Insurance Co. Ltd. doesn’t influence or support views of the writer of the article in any way. The article is informative in nature and PNB MetLife and/ or the writer of the article shall not be responsible for any direct/ indirect loss or liability or medical complications incurred by the reader for taking any decisions based on the contents and information given in article. Please consult your financial advisor/ insurance advisor/ health advisor before making any decision.

    PNB MetLife India Insurance Company Limited Registered office address: Unit No. 701, 702 & 703, 7th Floor, West Wing, Raheja Towers, 26/27 M G Road, Bangalore -560001, Karnataka
    IRDAI Registration number 117 | CIN U66010KA2001PLC028883

    Terms & conditions apply, Benefits stipulated are subject to premiums paid and policies in-force. For more details on risk factors, please read the sales brochure and the terms and conditions of the policy, carefully before concluding the sale.

    Tax benefits are as per the Income Tax Act, 1961, & are subject to amendments made thereto from time to time. Please consult your tax consultant for more details.
    Goods and Services Tax (GST) shall be levied as per prevailing tax laws which are subject to change from time to time.
    The marks "PNB" and "MetLife" are registered trademarks of Punjab National Bank and Metropolitan Life Insurance Company, respectively. PNB MetLife India Insurance Company Limited is a licensed user of these marks.
    Call us Toll-free at 1-800-425-6969, Phone: 080-66006969, Website:, Email: or Write to us: 1st Floor, Techniplex -1, Techniplex Complex, Off Veer Savarkar Flyover, Goregaon (West), Mumbai – 400062, Maharashtra. Phone: +91-22-41790000, Fax: +91-22-41790203.

    Beware of Spurious Phone Calls and Fictitious / Fraudulent Offers!
    IRDAI is not involved in activities like selling insurance policies, announcing bonus or investments of premium. Public receiving such phone calls are requested to lodge a police complaint.




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    As your trusted life insurance partner, PNB MetLife is with you amidst the current COVID-19 outbreak. Our policies also cover COVID-19 Claims. In case of a Death Claim, kindly submit the signed Claim Intimation Letter mentioning the policy number, brief of the insured event and other claim documents on the email mentioned herewith. Please write-in to us at or You can also call us on 1800-425-6969 for death claims intimations and for any queries on Monday - Saturday between 10:00 am - 7:00 pm.

    PNB MetLife Insurance, amongst the trusted Life Insurance companies in India, aims to provide a wide range of Life Insurance products that suits the needs of an individual at every stage of his life. Life Insurance Plans range from Term Life Insurance PlansTerm PlanProtection PlansLong Term Savings Plans , Retirement Plans & Child Education Plan.

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