Worked Example
ULIP vs Term-plus-MF: which builds more wealth over 20 years?
Scenario
Anjali, age 35, mid-career marketing manager in Mumbai, ₹18 lakh annual income, married with one child, ₹70K monthly household expenses
Inputs
- Years
- 20
- Amount INR
- 1,50,000
- ULIP tax %
- 0
- ULIP return %
- 8
- Term-plus-MF tax %
- 12.5
- Term-plus-MF return %
- 12
Calculation
- 1.
ULIP effective post-tax rate
8% × (1 − 0% tax) → 8%
- 2.
Term-plus-MF effective post-tax rate
12% × (1 − 12.5% tax) → 10.5%
- 3.
ULIP corpus at year 20
₹2L × (1+0.080)^20 → ₹6.99 L
- 4.
Term-plus-MF corpus at year 20
₹2L × (1+0.105)^20 → ₹11.05 L
- 5.
Wealth difference
|699144 − 1104935| → ₹4.06 L
Conclusion
Term-plus-MF wins by approximately ₹4.1 lakh over 20 years — driven by return rate.
Tradeoffs
Post-tax real returns matter more than nominal headline rates. Term-plus-MF loses more to taxation. Risk profiles differ too — guaranteed vs market-linked. Adjust for risk tolerance.