What is the Difference Between ULIP and PPF?

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Unit Linked Insurance Plan (ULIP) and Public Provident fund (PPF) are both popular choices among investors with different financial goals. If you are looking forward to investment but are confused between these two, this article compares ULIP vs PPF so you can pick the one you need. 

But first, let us take a quick look at these two investment modes.

You can opt for both insurance and investments with a single premium under this policy. These investments effectively aid in wealth creation that you can use as a retirement plan. Additionally, you can devise several strategies to increase your profits from investments.

On the other hand, there will be an insurance component to this financial instrument. In case of your unfortunate demise, your nominee will receive death benefits as agreed under the policy.

The Government of India introduced the PPF scheme in 1968 with the intention of encouraging citizens to save more from their earnings. The main reasons for this are its stable nature, attractive interest rates and tax-free returns.

Also, individuals have a strong sense of financial security since it is a Government scheme. You can even opt for a loan against your PPF account in case of a financial crisis.

Below are some things that you can consider to decide PPF or ULIP which is better for you:

• Returns on Investment: The rate for ULIP premiums is decided by the insurance provider. Moreover, the returns that you will be getting on your investment depend on fluctuations in the financial market. 

  However, in the case of PPF, the Government of India has set the interest rate. So you will get fixed returns every year from your investment.  

• Financial Coverage: In case of ULIP, you can get financial protection when you encounter an adverse situation. At the same time, you can amplify your wealth through investment in financial markets.

  On the contrary, in the case of PPF, you can only save a certain amount from your income for your retirement. So you cannot get any financial coverage during emergencies. 

• Liquidity: For ULIP, you can make withdrawals after the lock-in period, that is, after 5 years. On the other hand, for PPF, you can make partial withdrawals only after 7 years. You can also make complete withdrawals from PPF after the lock-in period of 15 years. 

• Tax Benefits:In case of ULIP, you can get a tax-free claim amount under Section 10D of the Income Tax Act. Additionally, you can also get a tax exemption of upto ₹5 Lakhs on your premiums under Section 80C.

  However, for PPF, you can only opt for a tax exemption upto ₹1.5 Lakhs under Section 80C of the Income Tax Act. 

  Considering these factors and the differences between ULIP vs PPF will help you make the right choice of investment. However, you must need to be sure about your financial goals and expectations from these investments.