Both Mutual funds and ULIPs offer market-linked returns on your investment. However, ULIPs offer certain advantages over mutual funds as follows:
Dual benefits of investment cum life insurance benefits under a single plan
Tax saving benefits (since ULIPs are essentially considered to be life insurance plans) [other than ULIPs, only ELSS or Equity Linked Savings Schemes provide tax benefits under Section 80C of Income Tax Act, 1961]
Maturity/ death benefits are exempt under Section 10(10D) of the Income Tax Act, 1961.