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In this policy, the investment risk in the investment portfolio is borne by the policyholder.
Kotak e-Invest
Features
Ref. No. KLI/22-23/E-BB/492
For individuals aiming to achieve short-term financial milestones, ULIP returns in 5 years serve as a strategic investment option. These plans combine market-linked returns with tax benefits and life cover, making them suitable for goal-oriented wealth creation. While they offer flexibility and potential growth, it is important to assess your risk appetite before investing.
5-year ULIP plans are tailored investment-cum-insurance products that come with a mandatory lock-in period of five years. During this period, policyholders are not allowed to make partial withdrawals or surrender the policy prematurely.
Like all ULIPs, these plans offer a dual benefit: life insurance protection along with the potential for market-linked returns. A portion of the premium ensures life cover for your loved ones, while the remaining is allocated to investment funds based on your financial goals and risk appetite.
After completing the lock-in period for ULIP returns in 5 years, you gain the flexibility to make partial withdrawals, switch funds, or even surrender the policy depending on your evolving financial needs.
A 5-year ULIP combines insurance coverage with market-linked investment opportunities, making it a practical tool for wealth building and protection. Whether you're planning your future through a ULIP retirement plan or exploring short-term investment options, it is important to understand how ULIP works before committing.
When you invest in a ULIP, you pay regular premiums, a portion of which is used for life insurance coverage, while the rest can be invested in funds of your choice, be it - debt, equity, or hybrid. The lock-in period for such plans is five years, during which you cannot make any withdrawals. After this period, ULIP withdrawal after 5 years becomes possible, giving you the option to access your funds through partial withdrawals or surrendering the policy. The performance of your investments will depend on market trends, fund selection, and applicable charges. To make informed decisions, you can estimate your maturity amount using a ULIP calculator.
Example:
Consider a scenario where you invest in a 5-year ULIP, paying an annual premium of ₹1 lakh for a sum assured of ₹10 lakhs. A portion of your premium is allocated toward life insurance coverage, offering financial protection to your family, while the remaining amount is invested in equity and debt funds, based on your risk preference.
Over the five-year period, your investment grows based on market performance and fund allocation. At the end of the term, you receive the accumulated fund value, representing your ULIP return in 5 years, after deducting applicable charges. In case of an unfortunate event during the policy period, your nominee receives either the fund value or the sum assured of ₹10 lakhs, whichever is higher, ensuring both protection and return potential.
From the flexibility and tax benefits of ULIP to the potential for wealth creation, a 5-year ULIP can offer a unique blend of features that cater to the diverse needs of modern investors.
A 5-year ULIP is ideal if you want to avoid locking in your funds for an extended period of time. It can balance your need for a relatively short investment horizon with meaningful financial growth. You can use the ULIP returns in 5 years to meet specific financial goals like funding a down payment, a vacation, or a business idea.
When exploring what is ULIP plan, you will undoubtedly come across market-linked returns as one of its key features. This is true for 5-year ULIP plans as well. The fund manager invests your premiums in equity, debt, or hybrid funds, allowing your money to grow. For instance, opting for equity-heavy funds in a bullish market could help grow your wealth significantly over the policy term. Though ULIP returns in 10 years can be relatively higher, consistent market monitoring can maximize returns even in a 5-year term.
Investing in ULIPs has dual tax perks, making them an attractive choice for investors who want to save taxes:
ULIPs give you control over your investments with fund-switching options. You can switch between equity, debt, or balanced funds based on market conditions and your risk appetite. For instance, during volatile periods, you might want to move investments from equity to debt to minimize risk. This adaptability ensures your funds work optimally towards your financial goals.
The life insurance component of 5-year ULIP plans ensures that your family members are financially protected regardless of market performance. In case of an unfortunate event, your family will receive the higher of the policy’s fund value or the sum assured. Suppose you have invested ₹5 lakh in the ULIP plan and have a sum assured of ₹10 lakh. Your family will receive a higher amount of ₹10 lakh if anything happens to you during the policy term.
There is no guaranteed return with ULIPs, and the actual returns will vary depending on the underlying investments. Let us see how 5 years ULIP return rates are calculated:
When you invest in a ULIP, your premium is divided into two parts. A portion goes towards life insurance coverage, and the remaining amount is invested in units of funds you choose. These funds can be equity, debt, or a balanced mix of both.
Think of Net Asset Value (NAV) as the price tag of your ULIP investment. It tells you how much each unit of your fund is worth at a given time. The higher the NAV, the more your investment grows.
Formula for NAV:
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In simple terms, if the NAV of your fund increases, your ULIP returns go up. If it dips, your investment temporarily shrinks. Since NAV fluctuates daily based on market conditions, keeping an eye on it helps you make smarter investment decisions.
Each year, the performance of the funds is reflected in the NAV. To calculate the annual return for a specific year, you can take the difference between the NAV at the beginning and the NAV at the year’s end and then divide that difference by the initial NAV.
Once you have the annual returns for five years, you can calculate the total ULIP returns in 5 years. This can be done by multiplying the returns year-on-year (1 + year 1 return) * (1 + year 2 return) and so on.
Investing in a ULIP for 5 years may seem like a straightforward plan, but your actual returns depend on several factors. Just like planting a tree, the quality of the soil, water, and sunlight all play a role in its growth. Similarly, your ULIP investment is influenced by market conditions, fund choices, and charges. Let’s break it down:
Imagine you’re on a rollercoaster—the ups and downs can be exciting but also nerve-wracking. The stock market works the same way. If your ULIP is invested in equity funds, your returns will depend on how well the stock market performs. In bullish markets, your investment may grow significantly, but during downturns, it could temporarily dip.
Think of ULIP funds like different investment paths. Equity ULIP funds are high-growth options—potentially rewarding but risky. Debt ULIP funds are more conservative—stable and secure. Hybrid ULIP funds strike a balance, offering a mix of growth and safety. Your choice determines how your investment grows.
ULIPs come with charges that may eat into your returns, just like how small expenses can add up over time. These charges typically include:
Strategic decisions can lead to significant ULIP returns in 5 years. It can be an excellent choice for you if you are looking for a disciplined and long-term approach to financial planning. If the market performance meets your expectations, you also have the option to extend your policy through ULIP renewal.
While considering ULIP returns in 5 years, it is crucial to assess your financial goals, risk tolerance, and the insurer’s track record. You must also study the ULIP returns in the last 5 years to get an idea of how the market is performing. Remember that ULIP returns can be influenced by market fluctuations, so it is essential to have a well-defined investment strategy in place.
1
Partial withdrawals or surrendering the ULIP policy before 5 years are restricted due to the minimum lock-in period. However, specific terms and conditions may vary depending on the ULIP plan and the insurer.
2
After the 5-year lock-in period, you can choose to continue with the ULIP, make partial withdrawals, switch funds, or surrender the policy. The maturity proceeds from ULIPs after 5 years are generally tax-free under Section 10(10D) of the Income Tax Act.
3
No, ULIP returns in 5 years are not guaranteed as they are subject to market fluctuations. The returns depend on the performance of the chosen funds and prevailing market conditions.
4
ULIP returns in 5 years are influenced by market performance, the choice of funds (equity, debt, or balanced), and fund management charges. Economic conditions and the performance of the underlying assets also play a significant role.
5
The typical range of ULIP returns in 5 years varies between 8% to 12% annually, depending on the market conditions and the chosen fund type. Higher-risk funds like equities can offer higher returns, while debt funds tend to be more stable.
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.
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
In this policy, the investment risk in the investment portfolio is borne by the policyholder.
Kotak e-Invest
Features
Ref. No. KLI/22-23/E-BB/521
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The content has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Further customer is the advised to go through the sales brochure before conducting any sale. Above illustrations are only for understanding, it is not directly or indirectly related to the performance of any product or plans of Kotak Life.
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