SIP in mutual funds is considered better than a ULIP policy because there are no additional hidden charges. Moreover, it is a pure investment product, and if you invest Rs 5,000, the entire amount will be used for investment. In the case of ULIPs, a part of it will go towards the premium and mortality charges. SIPs also offer higher returns than ULIPs. This could be why SIPs are a preferred investment to ULIPs.