How Much Wealth Can You Create from ULIP in 10 years?
Close
Close

Buy a Life Insurance Plan in a few clicks

Now you can buy life insurance plan online.

Kotak e-Term Plan

Protect Your family’s financial future with Kotak e-Term Plan. Know more

Kotak Assured Savings Plan

A plan that offer guaranteed returns and financial protection for your family. Know more

Kotak Guaranteed Savings Plan

A plan that offers long term savings and insurance in one premium. Know more

Kotak e-Invest

Insurance and investment in one plan with Kotak e-Invest. Know more

Kotak Health Shield

Insurance against medical expenses related to heart, brain, liver and Cancer. Know more

How Much Wealth Can You Create from ULIP in 10 years?

How Much Wealth Can You Create from ULIP in 10 years?
  • 7th Feb 2022 |
  • 1,362

Summary:

ULIPs have provided an average return of 10%-12% p.a. in the past. Going by the past records, you can expect a moderately high return from these investments. Keep reading to know more.

Content:

The benefits of a ULIP are not restricted to high returns. In addition to this, you can enjoy a life cover, tax exemptions and many more. Here are the major benefits of a ULIP.

Benefits of Investing in ULIPs

1.Dual Advantage

Investing in ULIPs gives you the dual advantage of a life cover and investment returns.

a) Life Cover:

Usually, the life cover provided is 10 times the annual premium. This amount is payable to the nominee in case of the policyholder’s demise during the policy term.

b)High Returns:

The major portion of the premium is invested, primarily in equity markets. This helps in generating higher returns. Historically, ULIPs have grown at 10%-12% p.a. on an average.

2.Tax Benefits:

a) Premium:

The amount paid by you as a premium is exempt from tax up to Rs. 1.50 lakhs per year.

b)Maturity Value:

  • The maturity value of ULIPs purchased before 1st February 2021, is exempt from tax under Section 10(10D) of the of the Income Tax Act, 1961.
  • The maturity value of ULIPs purchased after 1st February 2021, attracts 10% LTCG tax if the gains are above Rs. 1 lakh.

3. Flexibility to Switch Funds

Since the returns of a ULIP are linked to the market, most ULIPs provide free fund switch options. As a result, you can change your exposure according to the market movements and your requirements.

4. Long-Term Investments

A lock-in period of 5 years is applicable on ULIP investments. Hence, by default, ULIPs are for the long term. In fact, experts advise that an investment period of 10-20 years is ideal for ULIPs.

What are the Charges for ULIP Investment?

Generally, you will find 6 types of charges associated with ULIPs.

1.Premium Allocation Charges

The initial expenses incurred by the insurance company for underwriting, documentation, policy issuing, etc. This amount is charged upfront from the first premium. On average, the charges are approx. 1.5%-4% of the premium.

2.Mortality charges

In order to provide the life cover, ULIPs deduct a mortality charge from the premiums paid by you. Usually, this charge is calculated on every Rs. 1,000 of the life covers. This depends on your age, health risk and the mortality table.

3. Fund Management Charges

As per the IRDAI, ULIPs cannot charge more than 1.50% of the fund value towards the fund management charges. This includes the salary of experts and other professionals who manage your investment.

4.Policy Administration Charges

A monthly charge is levied on your account for administration purposes, like record-keeping, paperwork etc. For this purpose, the proportionate units are sold. The amount can either be fixed or variable as per the insurer’s policy.

5.Surrender Charges

A surrender charge is levied, if you surrender your policy within the lock-in period of 5 years.

Switch Charges

The insurer provides some free fund switches within a specified time fram. If your switches exceed this, you may be charged a pre-defined amount.

Example: Wealth creation from ULIP in 10 Years

Assuming the expected rate of return to be 10% (after charging all the expenses) and you pay a premium of Rs. 60,000 annually, your final corpus can look like this,

Date

Opening Investment

Invested Premium

Returns

Closing Investment

1-Jan-21

₹ -

₹ 60,000.00

₹ 6,000.00

₹ 66,000.00

1-Jan-22

₹ 66,000.00

₹ 60,000.00

₹ 12,600.00

₹ 138,600.00

1-Jan-23

₹ 138,600.00

₹ 60,000.00

₹ 19,860.00

₹ 218,460.00

1-Jan-24

₹ 218,460.00

₹ 60,000.00

₹ 27,846.00

₹ 306,306.00

1-Jan-25

₹ 306,306.00

₹ 60,000.00

₹ 36,630.60

₹ 402,936.60

1-Jan-26

₹ 402,936.60

₹ 60,000.00

₹ 46,293.66

₹ 509,230.26

1-Jan-27

₹ 509,230.26

₹ 60,000.00

₹ 56,923.03

₹ 626,153.29

1-Jan-28

₹ 626,153.29

₹ 60,000.00

₹ 68,615.33

₹ 754,768.61

1-Jan-29

₹ 754,768.61

₹ 60,000.00

₹ 81,476.86

₹ 896,245.48

1-Jan-30

₹ 896,245.48

₹ 60,000.00

₹ 95,624.55

₹ 1,051,870.02

The frequency of compounding is a determining factor to calculate the returns. If you pay a monthly premium of Rs. 5,000 instead, your final corpus will be ₹ 1,204,255/-.

Kotak e-Invest

In this policy, the investment risk in the investment portfolio is borne by the policyholder.

Features

  • Return of Mortality Charges*$
  • Enhanced Protection
  • Multiple Plan Options
  • Zero Premium Allocation Charges
  • Tax Savings^

Ref. No. KLI/22-23/E-BB/521

T&C

Browse our library of resources

- A Consumer Education Initiative series by Kotak Life

Similar Articles

Savings Plan for Grandchildren

How to Start Saving Money in 10 Simple Ways?

Why Should You Consider Guaranteed Savings Plan for Long-Term Investment?

What are the Best Investment Options For Females?

Planning Financial Goals and Objectives of Financial Planning

Best Investment Options in India in 2022

What are the Best Investment Options for Students in India?

Are Money Back Policies Helpful? A Complete Guide

How to Increase Net Worth Along with Family Protection

What are the Best Investment Options for Young Adults?

Importance of Portfolio Management

3 Tips to Buy Guaranteed Savings Plan

Complete Savings Plan for Low Income Earners

Things to Know Before Buying an Endowment Plan

Are Gains from ULIP Sale Taxable?

What are the Best Investment Options for Beginners or Amateur Investors in India?

Why is Portfolio Diversification Important? How to Diversify Your Portfolio?

What is ULIP Renewal?

Top 10 Investment Strategies to Create Wealth

How to Make Your Financial Portfolio?

Creating a second source of income with life insurance

Why ULIP is Better Investment for Long-Term Wealth Creation?

What are Some of the Safest Investment Options in India?

Learn About Safe Investments with High Returns in India

How to Plan your Investment to Achieve Periodic Financial Goals?

How to Plan Your Child's Education - A Step by Step Guide

How to Manage Inheritance Money?

Which is a Better Investment - Mutual Funds Or ULIP?

Building wealth through regular investing

Factors Affecting Stock Markets

What's Better for Your Child's Education? Child Plans or Mutual Funds?

Safe Investment Options with High Returns for FY 2018-19

How to Fulfil Your Financial Goals in the Next 10 Years?

ULIP vs FD - Which is Better and Why?

How to Plan Savings from Salary?

Is This The Right Time To Invest In ULIP? Why or Why Not?

ULIP Investment Strategy: Top Tips to Improve Your ULIP Gains

What is the Importance of Saving Money?

Difference Between Guaranteed Savings Plan and Guaranteed Income Plan

What are Mutual Funds?

Which is Better – FD, Mutual Fund, SIP, or ULIP?

What is a Savings Plan and What are is Benefits?

Difference Between Passive and Active Investing

Planning for Your Child's Higher Education? Explore These Investment Options

Early Investing and the Power of Compounding

Important Questions You Must Ask Yourself When Buying a ULIP Plan

How To Track ULIP Performance?

How Can a Legal Nominee Claim ULIP Benefits are the Policyholder’s Death?

ULIP Benefits You Can Avail from Early Investing

How Do One-Time Investment Plans Work?

ULIP as an Investment for Your Child

4 Benefits of ULIP Fund-Switching Feature

What is better - Guaranteed Savings Plan or Fixed Deposit?

Which are the Best Investment Plans for Indian Senior Citizens in 2022?

What is Fund Switch in ULIP? And ULIP Fund Switching Techniques

Difference Between Guaranteed Savings Plan and ULIP

Why Should You Invest in Term Insurance And ULIP?

How to Manage Your Portfolio Like a Professional?

4 Important Tips to Maximize Gains with ULIP Investments

Top 5 Investment Options in 2022 for Healthy Returns

Short Term and Long Term ULIP Plans for Wealth Creation

What are Tax-Deferred Savings Plans?

How is Compoud Annual Growth Rate (CAGR) Calculated in ULIP?

Why Should Parents Invest in Endowment Plan?

Endowment Plan vs Fixed Deposit?

Investment Options for NRIs in India

Basics of Guaranteed Savings Plan

Best Investment Options to Cover Your Child's Education

How Does an Endowment Plan Work?

What are the Best Short-Term Investment Plans with High Returns?

ULIP Plan as a Gift

Who Should Invest in Savings Plan?

What are Deferred Savings Plans?

How To Diversify Portfolio In 2022?

उच्च रिटर्न प्राप्त करने के लिए सर्वश्रेष्ठ इन्वेस्टमेंट विकल्प

Top 5 Principles That Need to be Followed for Wealth Creation

Customising investments to manage your wealth

Beginner's Guide to Wealth Creation: Meaning, Strategies, & Importance

Asset Allocations in ULIP - Know the Top Benefits

Different Types of Endowment Plans

Benefits of ULIP as a Child Insurance Plan

Why Do You Need A ULIP Plan - All You Need To Know

Best One-Time Investment Plans in India

Best Long-Term Savings Plans in India in 2022

Learn About Safe Investments with High Returns in India

Receiving regular payouts at various stages of life

Investments Options to Buy a house in India

Debt ULIPs vs. Debt Mutual Funds: What's the Difference?

Do You Know the Difference Between Savings and Investment?

How to Cancel ULIP Policy?

Top 6 Investment Plans Available in India

Successful Financial Planning for Urban Women

Can ULIP Help in Achieving Short-Term Financial Goals?