What does ₹1.5 lakh per year over 20 years deliver in a ULIP vs in Term + Direct Equity MF?
Scenario
32-year-old paying ₹1.5L/year for 20 years — comparing ULIP product vs unbundled Term + Direct Equity MF SIP
Inputs
- Buyer age
- 32
- Horizon years
- 20
- Term premium INR
- 15000
- Annual premium INR
- 1,50,000
- Ulip net return %
- 7
- Equity mf return %
- 12
Calculation
- 1.
ULIP cover (typically 10× annual premium)
10 × ₹1.5L → ₹15.00 L
- 2.
ULIP 20-year corpus at 7% net (after all charges)
₹1.5L × FV factor at 7% → ₹65.00 L
- 3.
Unbundled: pure term ₹1.5 Cr cover at 32, 30-year tenure
market rate → ₹1.50 Cr
- 4.
Unbundled: term premium per year
market rate → ₹15,000
- 5.
Unbundled: remaining for direct equity MF SIP
₹1.5L − ₹15K → ₹1.35 L
- 6.
Unbundled: 20-year MF corpus at 12% on ₹11,250/month
₹11.25K × SIP-FV factor 989 → ₹1.11 Cr
- 7.
Total advantage of unbundling (corpus + 10× cover)
see breakdown → ₹46.25 L
Conclusion
Unbundled approach delivers ₹1.11 crore vs ULIP's ₹65 lakh corpus — about 70% more — AND provides 10× the death cover (₹1.5 Cr vs ₹15L). Same out-of-pocket cost for the household.
Tradeoffs
The ULIP could outperform if equity markets dramatically underperform (5% gross return scenario) and inflation is low — but in that environment, the term + MF path still gives 10× cover. ULIP only wins if you would otherwise have spent the money (behavioural enforcement); for any disciplined saver, the math case for unbundling is decisive.