Term Insurance vs. ULIP: Which is better in 2026?

If you are deciding between a Term Plan and a ULIP in 2026, you are really choosing between two different goals: pure protection or protection plus wealth creation. Aditya Birla Sun Life Insurance (ABSLI), regulated by the Insurance Regulatory and Development Authority of India (IRDAI), offers both. A key 2026 change applies to each. Since 22 September 2025, GST on individual Life Insurance premiums is 0% (down from 18%), making both more affordable.

As per IRDAI and insurer disclosures for FY 2025-26, ABSLI settled 98.86% of individual claims with 630+ crore total claims paid. A Term Plan is the simplest, affordable form of life cover. It pays your family a fixed sum if you die during the term, with no investment component. A Unit Linked Insurance Plan combines life cover with market-linked investment, so part of your premium buys cover and the rest is invested in funds you choose.

Term Insurance vs. ULIP: Which is better in 2026?

What is Term Insurance?

Term Insurance is pure risk cover. You pay a low premium, and if you pass away during the policy term, your nominee receives the sum assured. If you outlive the term, there is usually no payout, which is why it costs so little. A healthy 30-year-old can secure ₹1 crore cover from roughly ₹9,000-12,000 a year. It is the most efficient way to protect your family's income. Explore the ABSLI Term Insurance range.

What is ULIP?

A ULIP splits your premium into two parts: one buys life cover, the other is invested in funds (equity, debt, or balanced) based on your risk appetite. Your money is converted into units priced at the fund's Net Asset Value (NAV), which changes daily. ULIPs have a 5-year lock-in and levy charges such as fund management, allocation, and mortality charges. Over the long term, they aim to build wealth while keeping a life cover in place.

ABSLI offers several ULIPs for different goals, for example, ABSLI Wealth Infinia (20 fund options, 5 investment strategies, cover up to age 85 or 100, and return of mortality and allocation charges at maturity), ABSLI Wealth Aspire (Classic and Assured options with multiple fund choices and top-up flexibility), and the ABSLI Salaried Suraksha ULIP for salaried individuals. Compare them on the ABSLI ULIP plans page.

Which should you choose in 2026?

• Choose Term Insurance if: Your priority is maximum life cover at the lowest cost to protect dependents, and you prefer to invest separately (in PPF, Mutual Funds, or NPS) for potentially higher returns.
• Choose a ULIP if: You want life cover and market-linked wealth creation in one disciplined, long-horizon (10+ years) product, and are comfortable with market risk and a 5-year lock-in.
• Consider both: Many people buy a large Term Plan for protection and add a ULIP for goal-based investing, getting the best of both.

Estimate your cover with the ABSLI Term Insurance Calculator before you decide.

Does the 0% GST change apply to both?

Yes. Since 22 September 2025, Individual Life Insurance premiums, both Term Plans and ULIPs, carry 0% GST instead of 18%. For ULIPs this means more of your premium goes toward cover and investment rather than tax. Group policies still attract 18% GST.

ABSLI Claim Settlement Ratio vs. leading Insurers (FY 2025-26)

Whichever you choose, the life cover only helps if the insurer pays. As per IRDAI and insurer disclosures, ABSLI settled 98.86% of claims in FY 2025-26:

Source: IRDAI and insurer public disclosures (Form L-40) for FY 2025-26. ABSLI's own disclosures report a CSR of 98.86% for FY 2025-26.

Conclusion

Term Insurance and ULIPs serve different purposes: term delivers affordable, high protection, while ULIPs combine cover with market-linked wealth creation. With 0% GST on individual premiums since September 2025 and a 98.86% individual claim settlement ratio for FY 2025-26, ABSLI is a dependable choice for either path. Assess your goals, protection versus investment, and explore options on the ABSLI Term Insurance and ULIP Plans pages.