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How To Track ULIP Performance?

Tracking the performance of your ULIP plan is as important as investing in it. Know how to track the performance for switching different types of funds.

  • Sep 15, 2023
Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

Keywords: how to track ULIP performance, track ULIP performance,

Unit Linked Insurance Plan or ULIP is a very popular modern financial tool that people are opting for. It is a product that offers both insurance and investment in one product. Moreover, the investment part of the ULIP policy allows you to grow with the market by allowing you to invest in market-linked products like equity, bonds, debts, shares, etc.

Although, buying a ULIP policy is not rocket science, and your insurance agent will easily guide you through the process, managing one is something that you need to become an expert at. It is not a very tough thing and with the help of some expert advice, precautionary guidelines, and predefined strategies, you can easily buy and manage your ULIP policy.

How to track the performance of a ULIP fund

Another important aspect of ULIP is to understand how to track ULIP performance and what are the steps to track ULIP performance. Without learning ULIP performance tracking, there is no way you can manage your ULIP policy efficiently. In this article, we will discuss how you can track the performance of your ULIP plan.

Strategies To Ensure Safe & Secure ULIP Investment:

Before we move on further to discuss how to track ULIP performance, it is important to understand that there are certain strategies that every investor must follow for safeguarding their investment. This will help in keeping a check on risk factors and, at the same time, guarantee stable performance. So, if you are a ULIP policyholder, the following strategies will help you ensure a safe and secure investment in the market-linked ULIP funds.

Select the right fund

Your investment is all about your financial goals. Having the right investment is your path to achieving your goals. In ULIPs, you need to choose the funds. So, it is advised to make sure that you are aligning for funds that offer good long-term returns and have lower risk factors. Alternatively, based on your risk appetite, you can choose different types of funds as per your goal.

Fund switching

It is one of the best features of ULIP policies that an investor can use to minimize their losses or make profitable gains. A policyholder can switch between their ULIP funds based on the risk appetite and market trends to gain more profit or minimize loss. Although, it is advised that before making a fund switch, the policyholder must investigate the history of the fund and check its performance over the years. Generally, an insurance company allows as many as four free fund switches. You can make unlimited switches between funds by paying a nominal switching charge if your free switch limit is over.

Stay Updated

Since you are dealing with market-linked funds, it is advised to keep yourself updated about the market funds and trends. Based on the movement of the market and its outlook, the policyholder can adjust the ULIP investment strategy and change the allocation of funds.

Do not surrender your policy

A ULIP policy has a minimum lock-in period of five years. Also, the longer you keep the money invested in ULIPs, the better returns you can get out of it. Thus, to ensure that you make a good return, you should stay invested in ULIP for a longer-term period. Surrendering the policy before five years can incur discontinuation charges along with other penalties and thus, can lead to a loss.

How To Track ULIP Performance?

The key factors to calculate ULIP performance are the premium and the duration for which the premium is to be paid. Now you need to calculate the Net Asset Value (NAV) of your ULIP policy and compare it with the initial NAV to get the absolute return value. Here are the steps to be followed for calculating absolute return:

Step 1

Calculate Initial NAV and Current NAV.

Step 2

Subtract Initial NAV from Current NAV (Current NAV - Initial NAV = Absolute return).

Step 3

Multiply absolute return value by 100 to get the percentage value.

It must be noted that the absolute return percentage only indicates the performance of ULIPs in the short term. As the ULIP investment grows on compounding factors over a longer tenure, you might not get the true picture by calculating absolute return. So, to track the actual performance of your ULIP policy, you will have to calculate the compounded annual growth rate (CAGR) value of your policy. You can get a better estimate with CAGR value, but as ULIP is a market-linked product, and CAGR does not consider market volatility, you will not get an exact estimate. The absolute return percentage and CAGR are enough to paint a picture for you to decide on your next moves.

From this discussion, the two best things that you can take out are that ULIP is a great investment product if you stay invested in it for a longer tenure and regularly maintain its performance. Even under dire circumstances, you must try ensuring that your policy is intact and you are not thinking of withdrawing it. Instead, make a partial withdrawal and do not discontinue your ULIP policy.

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

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- A Consumer Education Initiative series by Kotak Life