ULIPs vs Traditional PLans

Moneylife has compared ULIP with traditional plans in it's recent article. Akshay Mehrotra, Chief Marketing Officer, PolicyBazaar.com was quoted in the same saying “Most customers look at insurance as a saving and investment option; they may not be able to understand the core difference between traditional endowment and ULIP endowment. ULIPs have become more beneficial for customers since the 2010 IRDA guidelines; unfortunately, agents discourage the purchase of ULIPs today due to a lower distribution margin. We see many customers who come online and compare both traditional endowment and ULIPs."

It has been noticed that Traditional products have come back with a vengeance since the shift away from ULIPs. While asset allocation does emphasise some investment in debt instruments, does a traditional product offer any advantage over bank FDs? Neither beats inflation and, hence, it is necessary to have equity exposure to grow wealth over the long term and to balance your portfolio from time to time. Is the customer taking a huge risk as traditional products offer non-guaranteed returns? Some may offer guaranteed returns, but these are woefully low.