How to choose between a term plan and a ULIP for life insurance?

Asked 9 Sept 2025·7234 views

I am 35 years old, married with one child (3 years old). My annual income is ₹18 lakhs. An insurance agent is pushing a ULIP plan with a sum assured of ₹1 crore, premium of ₹1.5 lakhs per year for 10 years, and声称 12% returns. My friend says a term plan is better. Which is better for my situation? What sum assured should I target?

Asked by FinWiz24 Admin

2 Answers

Buy a term plan immediately. For a 35-year-old, a ₹1 crore term plan for 30 years costs approximately ₹12,000-15,000 per year — less than 1/10th of the ULIP premium. The ₹1.35 lakhs saved per year invested in a diversified equity mutual fund at 12% returns would grow to ₹4.5 crores over 30 years, far exceeding any ULIP performance.

Answered by Rajesh Kumar · 12 Sept 2025

The agent's 12% return promise in a ULIP is not guaranteed — ULIP returns depend on the fund's equity/debt allocation which fluctuates. In 2008, many ULIP funds lost 30-40% of their value. The lock-in period of 5 years also reduces flexibility. Your human life value (annual income × years to retirement × inflation factor) should determine your sum assured — aim for 15-20 times your annual income as a minimum.

Answered by Priya Sharma · 11 Sept 2025