Term Insurance vs ULIP: Features and Benefits Explained

Summary: 

• A term insurance plan provides pure life cover and does not invest your premiums in the market. 

• A ULIP plan combines life insurance with market-linked investments. 

• Term insurance may offer a high sum assured coverage at lower premiums, along with an exempt death benefit u/s 10(10D). 

• ULIPs are EEE (Exempt-Exempt-Exempt) schemes, where investment amount is allowed as deduction u/s 80C and interest + maturity amount is tax-free.  

• You can explore several term insurance plans online on the airpay money app. 

ULIP is a “dual-benefit” financial product that offers life insurance protection and investment benefits in a single plan. In contrast, a Term Life Insurance plan offers financial security to your family only through life cover, without any investment or savings component.  

Looking to invest in these options and confused? Read this article to first learn about both financial products individually and then see which option might suit you in 2026. 

What is a Term Insurance Plan? 

A term insurance is a pure financial protection product. You pay a fixed premium for a specific period called the “policy term”. If you pass away during this period, the insurer pays a pre-decided amount (called sum assured) to your nominee (post-submission of an insurance claim). This money could: 

• Replace the income you would have earned and 

• Support your family’s regular expenses, such as housing, education, and daily living costs.  

Note that a term insurance plan does not include any investment or savings component. Its sole purpose is to provide financial security to your dependents. 

Latest Features of a Term Insurance Plan 2026 

As per a CNBC TV18 report (dated March 2, 2026), term insurance adoption among high-net-worth individuals (HNIs) has doubled over the past two years. The HNI category expanded by 100% during this period and by more than 200% over the last five years. 

Additionally, high insurance covers are becoming standard. HNIs are now opting for an “average cover” of ₹2 crore, which is twice the ₹1 crore average usually chosen by non-HNI customers. So, are you also looking to purchase your term insurance plan in 2026?  

Check out its several features: 

What is a ULIP Plan? 

A Unit Linked Insurance Plan (ULIP) is a financial product that combines life insurance cover and market-linked investments. When you pay a premium: 

• One part goes toward life insurance and 

• The remaining amount is invested in market funds such as equity or debt 

Usually, people invest in ULIPs to achieve long-term goals such as retirement, children’s education, wealth creation, and more.  

Latest Features of a ULIP Plan 2026 

If you file your ITR under the old regime, you can claim the premiums paid for ULIPs as a deduction under Section 80C (up to ₹1.5 lakh per year). In addition, the maturity amount received from a ULIP is tax-free under Section 10(10D), provided: 

• The annual premium is below ₹2.5 lakh and 

• The sum assured is at least 10 times the premium 

Furthermore, some more features you must be aware of are: 

What are the Benefits of Investing in Such Financial Products? 

Both term insurance plans and ULIP plans may protect your family against financial uncertainty. However, the way they deliver value differs! Term insurance prioritises pure financial protection, while ULIPs combine protection with market-linked wealth creation. 

To gain more clarity, let’s check out the major benefits offered by each product: 

Conclusion 

So now you know how ULIPs and Term Life Insurance differ. A term insurance plan only provides “life cover” and does not invest your premiums in the market. In contrast, a ULIP plan combines protection with investment. A part of your premium is invested in market-linked funds for potential wealth creation. 

As an investor, you may prefer a term insurance plan when your priority is high sum assured coverage (at a lower cost) and income protection for dependents. Whereas ULIPs may be “ideal” when you want to build potential wealth along with life insurance cover.  

Want to check out some term insurance plans online? You may visit the airpay money app. 

We are a 360-degree financial wellness platform trusted by 1,00,000+ users. Here, you can explore multiple options offered by India’s leading insurers, such as Tata AIA and Axis Max Life.