ULIP Vs Fixed Deposits – Which to Choose?

You might have come across this dilemma, which investment product to choose – ULIP or Fixed Deposits? First let’s understand what these two products –

ULIPs vs Fixed Deposits – Which is better for you?

Before you zero on any of these products, answer the following questions?

a) What kind of investor are you?

a) Risk taking 
b) Conservative

If you are a conservative investor, FDs is better than ULIPs. If you are a risk taking investor, you can consider ULIPs.

b) What is the tenure for your investment

a) Less than 3 years 
b) More than 3 years

If your investment tenure is less than 3 years, FDs is better than ULIPs. If you are a long term investor, ULIPs are better.

c) What is the Rate of return you are expecting?

If you are expecting a fixed rate of return (rate provided by the FD Provider), Fixed Deposits is better than ULIPs

d) What are the tax benefits on the returns?

Return on FDs is taxable whereas withdrawal of ULIP investment is tax free.

Note – These questions are based considering the two investment products – ULIP and FD. The assumption is that the investor has to choose among these two products.

Another angle to understand the difference is – If you are a risk taking investor, with an investment tenure of more than 3 years and expecting excellent returns ( returns more than fixed deposits), then you can invest in ULIPs.

Advantage of ULIP is insurance. Every insurance comes with an insurance cover. A major drawback of an ULIP is the expenses/charges are much more as against FD.

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