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

Buying a ULIP plan for at least 10 years will have a significant profit. Read here to know the benefits of investing in ULIP for a 10-year plan.

  • 6,979 Views | Updated on: Jan 10, 2024

Despite the fact that the market today appears to be swamped with investment options that promote the practice of continual wealth multiplication through investing, there appears to be a lot of confusion surrounding the concept - which is only natural. For example, if you want to get your hands on numerous investment sources in one, you should consider a ULIP. But if you are not aware of how it works and whether you will get the desired result or not, you might be a little sceptical about investing in ULIP.

In this blog, we will go over the basics of ULIP policy, its benefits, and if they’re a smart 10-year investing choice.

What is ULIP?

ULIP stands for Unit Linked Insurance Plan. It is a type of long-term investment that can enable you to achieve a range of investing goals, such as retirement income, future financial planning for your children, and asset building. The five-year lock-in term stipulated by the government ensures investment stability even while delivering substantial market-linked gains. The best ULIP policy combines life insurance with investment in debt, equities, or balanced funds. ULIPs provide income security for your family even though you’re not present, as well as boost earnings and support you in meeting your long-term objectives.

ULIP Returns in last 10 Years & Its Importance

Financial experts estimate that if you invest in ULIP insurance for at least 10 years, you may anticipate a 10 to 12 percent annual rate of return. This is one of the primary reasons why ULIPs are viewed as a sound long-term investment. Investing for a longer length of time, such as ten years, allows your policy to survive short-term market losses while reaping big rewards in the long run.

ULIPs beat other long-term investment options, including the Public Provident Fund (PPF), National Savings Certificate (NSC), etc. ULIP returns in 10 years are anticipated to yield larger returns than other market-linked products such as ELSS, tax-saving mutual funds, and so on. These other investments give strong returns but not enough to outperform rapidly rising inflation in the long run. ULIP return in 10 years of investments, on the other hand, has the potential to outperform inflation if held for a minimum of 10 years.

Features of ULIP Policy

Fund Switching & Flexibility

The ability to move funds is the best feature of a ULIP policy. ULIP investments allow you to adjust your money allocation over time based on your risk tolerance and market movement. These plans are quite adaptable, and you have a vast selection of alternatives to pick from when it comes to finances. You can choose your premium payment term, premium mode, and ULIP plan duration. This enables you to fund your ULIP insurance plan without straining your budget.

Insurance Option Protection

ULIP plans combine investing and insurance coverage into one package. A portion of your premiums is invested in market-linked securities, while the remaining is utilized to provide you with a solid life insurance policy.

To conclude, ULIP return in 10 years is an advantage of the investment tool, allowing it to benefit from a variety of sources. With these basic features and the possibility to produce significant returns, it is worthwhile to purchase a ULIP for a 10-year term.

ULIP RETURNS IN PAST 10 YEARS

Unit Linked Insurance Plans (ULIPs) offer investors a life insurance policy as well as an investment opportunity to help them accomplish their life goals. Because a ULIP Plan offers various types of funds for investing, an investor must select only the one that matches his or her risk tolerance. They must also determine the time or duration for which they want to invest. A ULIP policy allows you to invest in equities and debt funds.

Consider the following aspects that influence your Return On Investment (ROI) estimation:

ULIP charges

Before analysing the results, the investor should be aware of the fees levied by ULIPs. Because these fees are determined by the insurance companies, they differ from one to the next. Every ULIP plan typically has charges such as a policy administration charge, a fund management charge, a premium allocation charge, and a mortality charge.

Market performances

Market performance has a significant impact on ULIP results. As a result, in order to optimise greater returns from the selected fund possibilities, perform a historic performance check on them to get an idea before making a decision, but previous performance is not indicative of future returns. The investor must be able to easily measure his or her gains after investing in ULIPs. Measuring ULIP returns allows policyholders to monitor the performance of their funds. As a result, go over these two practical methods for calculating ULIP return in 10 years. If your returns are up to a year, you can consider the full return. CAGR can be used if the returns span more than a year.

Take a look:

Absolute Returns

To compute absolute returns, the policyholder should ideally just need the scheme’s current Net Asset Value (NAV) and its inception NAV. However, he must first complete the three basic steps:

Step 1: Subtract the starting NAV from the current NAV.

Step 2: Subtract the value obtained from the starting NAV.

Step 3: To get a percentage, multiply the quantity by 100.

The mathematical equivalent of the formula for determining absolute returns is:

[(Current NAV- Initial NAV)/ Initial NAV] x 100

This method is said to be an excellent way to analyse the performance of a ULIP that is kept for a short amount of time. For example, if the NAV rate is ₹230 at the time of purchase, it will progressively rise to ₹265 after a year. The absolute returns in this situation will be around 15%.

Compounded Annual Growth Rate (CAGR)

CAGR denotes the annual increase of a policyholder’s investment over a given time period. To calculate CAGR, the investor must use the correct mathematical formula.

CAGR is calculated as

[(Current NAV value/Initial NAV value) (1/ number of years)]-1 *100.

This calculation normally takes into account the scheme’s end and beginning values, as well as the number of invested years. For example, if the NAV at the time of purchase is ₹25, it will rise to ₹35 after 5 years. It can be calculated as [(35/25) (1/5)] - 1 x 100= 6.9%. As a result, the final percentage value of CAGR is 6.9%.

Measuring ULIP return in last 10 years is not difficult. All you need to do is follow the correct methods and calculations to prevent complications and get an idea of your profits. Whether you want to achieve maximum or balanced earnings, invest in ULIP funds based on your risk tolerance to achieve your life goals.

- A Consumer Education Initiative series by Kotak Life

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

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