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This presentation contains some of the differences that exist between mutual fund and ULIP .

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  1. 1. ULIP vs. MUTUAL FUND Presented by Mr. Baid Nath Singh
  2. 2. ULIP vs. MUTUAL FUND <ul><li>Insurance </li></ul><ul><li>Entry Load </li></ul><ul><li>Maturity </li></ul><ul><li>Compulsion of Investing </li></ul><ul><li>Tax Saving </li></ul><ul><li>Flexibility of time of redemption </li></ul>
  3. 3. Ajay Rs.50000.00 ELSS + Term ULIP Sum Assured Rs.2,50,000.00 I N V E STMENT
  4. 4. In a ULIP, Ajay would pay (taking the Pru ICICI LifeLink 2 as an example): - Entry load of 5% = Rs. 2,500 - Admin charges of Rs. 20 p.m. = Rs. 240 per year. - Mortality charges of Rs. 140 per year . (approximate) - Fund related charges of 1.5% (maximiser plan) = Rs. 750. This means the amount that is paid out as charges is: Rs. 3,630 . Money actually invested using ULIP is Rs. 46,370/- . Now if Ajay decided to use ELSS for investment and a term plan for insurance. Term plan cost (@Rs. 300 per lakh for 2.5 lakhs) = Rs. 750. (most plans have a minimum, but this is just for illustration)
  5. 5. Money left for investment = Rs. 49,250. If Ajay puts this in an ELSS he gets charged: - 2.5% entry load = Rs. 1,232. - Fund management (it’s a hidden cost in MFs) @1.5% = Rs. 740 So money invested using ELSS is Rs. 47,278/- . That means, if you use the ULIP route, around 2.5% LESS of your money is invested . There’s another disadvantage. Let’s say Ajay dies in the third year - How much does his family get? In ULIP case, the limit is the HIGHER of invested units or the sum assured, in this case: Rs. 2,50,000.
  6. 6. <ul><li>In ELSS+TermPlan case, ELSS is recovered in full, around Rs. 50,000 (Assuming terribly low growth in three years of the invested amount) Term plan pays out full sum assured of Rs. 2,50,000. What this means is the family gets Rs. 3,00,000. Summary </li></ul><ul><li>22% of money is allocation fees in ULIP ! These fees will take away any advantage the funds actually have </li></ul><ul><li>In case of death in the 3 rd year Ajay gets Rs250000.00 in ULIP but he gets Rs300000.00 in ELSS+TERM </li></ul><ul><li>Less money is invested in ULIP </li></ul><ul><li>ELSS+TERM is better than ULIP </li></ul>