Abhibyakti Singh

Abhibyakti Singh

Executive Assistant, LXME

On the road to financial freedom and empowerment, women have several investment options available for them to choose from. Two among them are: ULIPs and Mutual Funds. In this blog, we’ll cover ‘what is ULIP plan?’, how ULIP works and the difference between ULIP and mutual fund. Read on to find out which between the two is the better investment plan for women investors.

What are ULIPs?

ULIPS or Unit-linked Insurance Plans is a type of life insurance plan. Under this plan, a portion of the premium paid by the policyholder goes towards life insurance coverage and the remaining amount is allocated towards investments.

What are Mutual Funds? How Mutual Funds work?

A Mutual Fund pools money from various investors and puts these funds into different assets such as equity, debt, gold, etc., depending on the specific scheme chosen by the investor. It is professionally managed and monitored by a fund manager whose goal is to generate returns for the investors.

You can check out LXME’s goal-based portfolios that are well-researched, diversified and curated by experts. You can start investing towards your goal with just Rs. 100!

PurposeA combination of insurance and investmentInvestment for wealth creation
DurationFor long termFor short term or long term
Lock-InHas a lock-in of 5 yearsNo lock-in, except for ELSS Funds which have a lock-in of 3 years
RiskDepends on policyDepends on scheme
Regulatory BodyRegulated by Insurance Regulatory and Development Authority of India (IRDAI)Regulated by Securities and Exchange Board of India (SEBI)
Payment methodPremium payments to be made in Lump Sum or in intervalsCan invest via SIP or Lump sum
 Tax BenefitsEligible for deduction upto Rs. 1.5 Lakhs under Section 80CELSS Funds are eligible for a deduction upto Rs. 1.5 Lakhs under Section 80C

ULIP vs Mutual Fund which is better for a Woman Investor

Investment Goals and Risk Appetite

The decision of where to invest your money starts with determining your investment goals and the level of risk you are willing to take.

Time Horizon

A major difference between ULIP and mutual fund is the time horizon required. Investment in ULIPs requires a long time horizon, ranging from 5 years. Mutual funds, on the other hand, have varying time horizons depending on the type of scheme chosen by the woman investor.

Diversification options

There are limited types of ULIP and they only invest in selected investment options. Therefore, if you only invest in ULIPs, your portfolio diversification will be impacted. Mutual funds come with multiple options across asset classes, time horizons and risk levels. Women can invest according to their goals and diversify their portfolio across asset classes such as equity, debt and gold.


ULIPs offer insurance benefits which raises their cost and impacts returns. Mutual funds typically aim at offering higher returns as compared to ULIPs. The returns of the mutual fund depends on the type of MF chosen. For example – Equity MF will aim at offering high returns over the long term while debt MF may not offer similar returns, but is suitable for short-term goals.

Charges and Expenses

Charges on ULIP schemes (such as premium allocation charge, fund management charge, administration charge, surrender value charge etc.) can be expensive as they have an insurance component to it. However, mutual funds involve lower costs (expense ratio, stamp duty charges etc,) and are professionally managed.

Is it smart to mix insurance with investment?

You should never mix insurance with investment. Insurance is a protection tool, it is a cost for an individual. However, investments are done with an aim to generate returns. It is always smart to keep them separate to achieve your financial goals.

You can also check out this blog on investment plans for women

Here are certain restrictions of ULIPs:

Lock in – 

ULIPs have a lock-in of 5 years, during which you cannot withdraw your money.

Higher Charges –

ULIPs are subject to high charges which decrease your returns.

Complex –

ULIPs mix investment and insurance together, which can be complex and confusing.

To sum up, women investors are generally better suited to invest in mutual funds online, rather than in ULIPs. Mutual Funds offer flexibility, diversification, and higher returns, so it is better to have a separate life insurance cover and invest in mutual funds separately for your financial goals.

Want to invest in Mutual Funds? LXME has curated the best-suited mutual funds for women out of the 2500+ schemes available in India, check out the ‘invest’ tab and explore our time and goal-based portfolios.


Why SIP is better than ULIP?

SIP is better than ULIP because it gives flexibility in investment, the opportunity to diversify, and a higher potential for returns.

Does ULIP give good returns?

ULIP gives lower returns when compared to mutual funds. High charges on ULIPs decrease the returns generated. While returns on mutual funds are dependent on the type of fund chosen.

Is it good to invest in insurance + investment plans?

The saying “never mix investment and insurance” suggests that it is not a good idea to combine investment and insurance products into a single financial product. This is because the primary purpose of insurance is to provide financial protection against unexpected events, such as death, disability, or illness, while the primary purpose of investment is to generate a return on investment over a period of time.

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