ULIP vs ELSS
ELSS can be considered to be a conservative mutual fund which can save you taxes remarkably. A huge amount can be easily retained with just one investment. An equity linked saving scheme (ELSS) can be hugely beneficial under Section 80C. As an investment, ELSS has easy costs, fair returns and quite upfront operations in terms of investment.
Operationally, there are no commonalities between Equity Linked Savings Schemes (ELSSs) and Unit Linked Insurance Plans (ULIPs). However, we shall still attempt to put forth a fair comparison. It is quite basic to complicate insurance with investments. These two different scheme serve separate goals. It is already known that ULIP is a good blend of insurance and investment both, whereas ELSS is a total equity fund. Both the investment options can be tax saving however, that is the one and only similarity.
ELSS have ease costs, fair returns and clean operations in terms of the investment goals. That’s so not the goal of ULIP. From the premium paid, the insurance company charges mortality charges, admin expenses and fund management fees. And the residual amount is then invested into the chosen funds. The first year charges are high for ULIP investment which includes the acquisition cost including the commissions.
Also Read: ULIP: Your Goal based Savings
A fair comparison between the two is possible when ULIP is compared for the investment portion which is invested into a fund along. This will be further applicable for the returns part. Although, this piece of information is not easily available. Under an ULIP investment, the right mix facilitates investors with a cost and benefit tradeoff, after taking all conditions into consideration.
Unfortunately, the investment gets locked for a longer duration under an ULIP plan which is not the case with ELSS. This directly hampers transparency and liquidity of the kept money. Hence, typically the benefits are assumed after a lifetime of 5 years. The lock in period of ULIPs further stretches the investment for a good 10-15 years. With the skyrocketing costs, evaluation difficulties and low flexibility, ULIP becomes a less preferable choice.