New Delhi, Jan. 30 -- Index funds have garnered significant attention in the world of mutual funds, largely due to their low-cost structure. Recently, life insurance companies have also ventured into this space, offering index funds as part of their unit-linked insurance plans (ULIPs). However, unlike traditional mutual funds, these index funds in ULIPs maintain the same high cost structure as actively managed funds, which, combined with other product charges and tracking errors, significantly diminishes policyholder returns when compared to the underlying index.

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An index fund typically tracks a broad index, like the Nifty50 or NiftyNext50, without the need for an acti...