New Delhi, May 3 -- My insurance agent is recommending a Ulip with an annual premium of Rs.100,000 and a sum assured of Rs.10 lakh. He says it gives me both life cover and market-linked investment returns in one product. Is this a good deal? How does a Ulip compare to buying a term plan and investing in mutual funds separately?

- Name withheld on request

The comparison you are making is the right one. Unit-linked insurance plans (Ulips) bundle life insurance and investment into a single product. There are two principal benefits of such a plan. First, ease of administration of a single plan with dual objectives. Second, Ulips carry a tax advantage. Ulip maturity proceeds are exempt from tax provided the annual premium does not exceed Rs....