Term Insurance vs ULIP: Which Should You Pick First?

When it comes to life insurance, term plan vs ULIP is a common dilemma for many first-time buyers. Both provide life cover, but the way they work and the benefits they offer are completely different.

While a term plan offers pure protection, a ULIP (Unit Linked Insurance Plan) combines protection with investment. Choosing the right one first depends on your goals, financial situation, and stage of life.

In this blog, we’ll break down ULIP vs term insurance, highlight key differences, and help you decide which one to pick first.

What is a ULIP and How Does It Work?

A ULIP is a two-in-one product. It offers life insurance and also lets you invest your money in market-linked funds such as equity, debt, or balanced funds.

Your premium is split — one part goes towards life cover, and the other is invested to help you grow wealth over time.

So, ULIPs are ideal for those who want to protect their family while also building wealth for long-term goals like children’s education, buying a home, or retirement.

Explore the best ULIP plans for wealth creation.

What is Term Insurance & How Does it Work?

A term insurance plan is a pure life cover. You pay premiums, and if something unfortunate happens to you during the policy term, your family receives a lump sum amount called the sum assured.

However, if you survive the term, you don’t get any returns or maturity benefits (unless you choose a return-of-premium variant, which costs more).

Term plans are affordable, simple, and offer high coverage at low cost — making them ideal for securing your family’s future.

Read more on the difference between term and endowment plans.

Term Insurance vs ULIP: Key Differences That Matter

Here’s a quick comparison to help you understand the difference between term insurance and ULIP:

Term or ULIP – Which One Should You Get First and Why?

If you’re buying your first life insurance plan, a term plan should come first. It ensures that your family is financially secure, even in your absence. The premium is low, so you can get high coverage at an affordable cost.

Once you’ve secured protection, consider investing in a ULIP if you want your money to grow for future goals. ULIPs help you build long-term wealth, offer fund-switching flexibility, and come with tax benefits.

In short:

• Start with a term plan to protect your family.
• Add a ULIP if you're looking for growth + life cover.

Want both in one smart plan? Check out our long-term investment plan with insurance benefits.

In Conclusion: Can You Have Both Term Insurance and ULIP?

Yes, and many people do. Buying both helps you balance protection and investment. Here’s how:

• Use a term plan to cover major life risks and ensure your family’s needs are met.
• Use a ULIP to invest in equity or debt funds and create wealth over time.

By combining both, you get high insurance cover and long-term returns, all while enjoying tax benefits under Section 80C and 10(10D).

This strategy is especially useful if you want to secure your family and invest for future goals like retirement or a child’s education.

FAQs: Common Questions About Term Plans and ULIPs

1. Is ULIP better than term insurance for long-term wealth?

ULIP is better if you want investment + insurance. It helps you create long-term wealth, while term insurance is purely for life cover. Ideally, start with term insurance and add a ULIP as you grow financially. Remember, a term insurance plan is a must for every family.

2. What happens if I stop paying ULIP premiums?

If you stop premiums before 5 years, your ULIP goes into a discontinued policy fund, with limited returns. After 5 years, you may withdraw or continue with a reduced benefit. Always check your insurer’s terms.

3. Can I upgrade my term plan to a ULIP?

No, term plans and ULIPs are different products. However, you can buy both together.

4. Are ULIP returns guaranteed?

ULIPs invest in market-linked funds, so returns are not guaranteed. However, with a long-term horizon, ULIPs have the potential to offer attractive returns, especially in equity-based funds.