Every year, millions of salaried Indians sit across from an insurance agent and face the same question: term plan or ULIP? The agent often pushes the ULIP — higher commission, more complex product, harder to say no to. But is a ULIP actually better for your financial future? Or does the good old term plan, combined with a mutual fund SIP, beat it hands down?

In 2026, with new tax regime rules reshaping deduction strategies and equity markets delivering volatile but meaningful returns, this debate is more relevant than ever. This article cuts through the jargon, compares both products on every important dimension, and tells you which one a salaried Indian should prioritise — and when.

First, Let’s Get the Basics Right

Before comparing, you need to clearly understand what each product actually does — and what it does not do.

Head-to-Head: Full Comparison

Here is a comprehensive side-by-side breakdown across every dimension that matters for a salaried Indian in 2026.

The Real Cost of a ULIP vs Term Plan

Here is where most salaried investors are genuinely shocked. Consider a 30-year-old male, non-smoker, buying ₹1 crore of life cover for 25 years.

This illustration reveals the core argument made by financial planners for decades: buy term and invest the difference. The surplus saved on premiums, invested consistently in a diversified equity mutual fund SIP, can build a materially larger corpus over 20–25 years than a ULIP — primarily because of lower charges and direct market exposure without insurance cost drag.

ULIP Charges: The Hidden Drag on Returns

ULIPs are significantly more transparent today than they were a decade ago — IRDAI has mandated charge disclosures. But they still carry multiple layers of cost that eat into returns:

The combined drag of ULIP charges can reduce effective returns by 1.5–3% per year compared to a direct equity mutual fund. Over 20 years, this difference compounds significantly.

Tax Benefits in 2026: What Actually Saves You Money

With the new tax regime now the default for most salaried employees, the tax calculus for both products has shifted. Here is the updated picture:

Key insight for salaried individuals under the new tax regime: since Section 80C deductions are not available, the primary tax argument for choosing a ULIP over a mutual fund weakens considerably. The 10(10D) maturity exemption remains a ULIP advantage, but it is only applicable if your annual premium stays within ₹2.5 lakh — which limits the investment scale.

Who Should Buy Which Product?

There is no universal right answer — but the profiles below cover the large majority of salaried Indians making this decision in 2026.