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Endowment Plans Vs. ULIPs – A Comprehensive Comparison Guide

By Barsha Bhattacharya

27 June 2025

5 Mins Read

ULIP vs. Endowment Plan

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Endowment & ULIP are different types of life insurance plans, where policyholders receive maturity benefits in a lump sum, helping to build a corpus over time. 

But, they differ too on certain parameters, like withdrawal facility, risks, coverage, etc. 

In this article, we will do a ULIP vs. endowment plan comparison. Let us go through them in detail before purchasing one.

What Is An Endowment Plan?

This plan offers dual benefits, combining a savings plan & life insurance, where the premium amount is accumulated over a specified period. 

Further, upon maturity, an amount as mentioned at the time of purchase will be paid in a lump sum. 

Also, in the event of the policyholder’s death, the sum assured, along with the bonus amount, will be paid to their nominees. 

This means the policyholder is required to pay a premium amount on a regular basis for a fixed tenure period. 

A part of their contribution is diverted towards life insurance coverage, which ensures financial security to the family members & partly gets accumulated towards savings.

What Is ULIP?

A ULIP is a type of health insurance plan where the insurance company invests the premium amount paid by you in multiple financial instruments, such as bonds, stocks,& mutual funds. 

In the event of the policyholder’s death, the sum assured will be paid to their nominees. The maturity benefit, in this case, will depend on the performance of investments made. 

With ULIPs, a policyholder will get dual benefits because it has insurance and investment factors. Thus, ULIPs stabilize the financial future of a family and ensure financial growth at the same time. 

One can opt to invest in debt, equity, or both, depending upon the level of risk & your objectives, making it an ideal investment option. It provides a flexible option to switch between the funds anytime during the policy tenure. 

ULIP Vs. Endowment Plan:  What Are The Main Differences?

Provided are the differences between endowment plans & ULIPs:

Basis of DifferenceEndowment PlansULIPs
Flexibility in InvestmentLimited, premiums are fixed,& so are benefits.It offers flexibility to switch between the funds, depending on the risk tolerance level & market situations.
Investment ComponentIt offers assured returns, hence helping to accumulate funds & maintain a corpus.It invests funds in multiple varied funds, such as debt, equity, or balanced funds.
Tax BenefitsThe premium amount is eligible for tax deduction u/s 80(C). 
Additionally, the maturity proceeds are exempt from tax u/s 10(10D).
The premium amount is eligible for tax deduction u/s 80(C). 
Additionally, the maturity proceeds are exempt from tax u/s 10(10D).
Market-Linked ReturnsAs they are not subject to market volatility, they offer higher returns.Due to them being linked to the market, they offer higher returns.
Long-term Wealth CreationIt helps build wealth over time.It helps in the long-term wealth creation of funds.
Insurance CoverageIt only offers life insurance benefits, ensuring financial security.It offers dual benefits of insurance plus investment.
Liquidity OptionsLimited liquidity, as it charges a penalty on premature withdrawal of funds or surrender options.Provides liquidity through its features, such as premature withdrawal, surrender options, etc.
Lock-in-PeriodNo Lock-in-periodMandatory lock-in period of 5 years

Role Of Endowment Plan In Retirement Planning

Financial security, taxation benefits, and what more? Let’s learn the role of an endowment plan in retirement planning. 

• Financial Security

This plan offers financial security to the family members in the insured’s absence, hence offering mental peace.

• Forced Savings Discipline

When you make a regular payment toward your premium, it makes a habit of discipline in savings, leading to long-term wealth creation.

• Taxation Benefits

As per the Income Tax Act of 1961, get taxation benefits on the amount of death & maturity benefits received under the endowment plan.

• Goal-Based Savings

An individual can plan his/ her savings according to the milestones of life, such as buying a property, children’s higher education, children’s marriage, retirement, etc.

• Stable Returns With Low Risk

This plan best suits those individuals who prefer a low level of risk, as it offers stable returns.

• Flexibility & Customization

This plan provides an option to customize the policy & add riders according to your convenience & requirements.

Role of ULIPs In Retirement Planning

Flexibility and partial withdrawal facilities remain some of the major benefits of ULIPs in retirement planning. Learn more here. 

• Dual Benefits

ULIP has its dual benefits of insurance with investment, which allows wealth growth &financial security for family members.

• Fund Options

It offers many fund options, such as equity for high growth & debt for stability, which fulfill all types of risk tolerances.

• Life Cover

It provides life coverage to the policyholder’s nominees in case of the sudden demise of the policyholder, hence providing financial support to the family.

• Flexibility

It provides flexibility to adjust between the funds, allowing you to switch your investments as per the market conditions &your risk tolerance levels.

• Transparency

The fees & charges are clearly disclosed, which helps in making informed decisions.

• Tax Benefits

Get a tax deduction on the amount of premium paid u/s 80C, &the amount of proceeds to be received on maturity is exempt from tax u/s 10(10D). 

• Partial Withdrawal

You can withdraw your funds partially from your fund value after the lock-in period is completed to meet emergency situations.

ULIP Vs. Endowment Plan: Which Is Better?

The decision to choose between Endowment & ULIP Insurance depends on multiple factors, such as investment horizon, financial objectives & risk tolerance level. 

An endowment plan is best for risk-averse individuals, those who prefer lesser risk with guaranteed returns. 

Moreover, as they are not linked with the market, they offer secure & gradual expansion of corpus funds for retirement. 

On the contrary, if individuals want higher returns & are willing to accept high risks over a longer duration, ULIPs are the best solution. 

Moreover, under this plan, you invest money in equity, offering flexibility according to market fluctuations & risk tolerance level.

ULIP Vs. Endowment Plan: Choose The One That Fits Your Financial Goal

Both endowment & ULIPs help in financial planning & achieving retirement goals. 

So, deciding between the two plans depends on the financial objectives, investment horizon, & risk preferences of an individual. 

Furthermore, ULIPs are flexible, market-linked, & dynamic investments. On the contrary, endowment plans offer disciplined savings, conservative, limited flexibility, & guaranteed returns. 

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Barsha Bhattacharya

Barsha Bhattacharya is a senior content writing executive. As a marketing enthusiast and professional for the past 4 years, writing is new to Barsha. And she is loving every bit of it. Her niches are marketing, lifestyle, wellness, travel and entertainment. Apart from writing, Barsha loves to travel, binge-watch, research conspiracy theories, Instagram and overthink.

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