ULIP vs Term + Mutual Fund Calculator

Rarely. The main genuine advantage: 3-year lock-in forces investment discipline for some people. Also, ULIP gains are tax-free under certain conditions. But most investors are better served by separately buying term insurance and mutual funds.

High commissions. A ULIP agent earns 20–35% of the first-year premium as commission. A term insurance agent earns 7.5–15%. A mutual fund distributor earns 0.5–1% annually. The incentive structure explains the sales pattern — it's almost entirely about commission.

After 5 years (lock-in period), you can surrender or switch to paid-up status. Surrendering before 5 years means paying surrender charges and the fund value is transferred to a discontinued policy fund earning 4%. Once 5 years is crossed, assess whether continuing or surrendering and reinvesting makes more sense given current fund value and charges.

ULIP premiums qualify for 80C deduction (old regime). Maturity proceeds are tax-free if annual premium is below 10% of sum assured. However, ELSS mutual funds also qualify for 80C with only a 3-year lock-in (vs ULIP's 5 years) and potentially higher returns. LTCG on equity MFs above ₹1.25 lakh is taxed at 12.5% — but this is still often better than ULIP returns after charges.

If it's a good policy you've paid for years, it may not make sense to surrender — you've already paid the high early-year charges. Continue if the fund performance is reasonable. For policies less than 5 years old, calculate whether continuing costs more than surrendering and redirecting.