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A 15-year ULIP policy will give you a twofold benefit of investment as well as life cover, making sure that your loved ones are financially covered. Through the market growth and compounding capabilities, you can increase your savings through ULIP returns for over 15 years.
A 15-year ULIP policy offers financial opportunities which is a combination of investment opportunities and life insurance coverage. During 15 years, you get to invest in a range of market-correlated funds, be it equity, debt, or a combination of both. The investment portion of your premium is invested under professional fund managers based on the performance of the market.
The ULIP returns and accumulated corpus can be utilized by you on the completion of 15 years in an attempt to reach your financial objectives. As an example, an individual can invest in a ULIP retirement plan to enjoy life after retirement.
Regarding the insurance, the policy offers life coverage, and your family will be covered in the event of an unprecedented event. As a policyholder, you will be able to customize the features of the policy, including the sum assured amount, the frequency of paying the premium, and so on. Having known the twofold benefits of ULIP, we now move on to exploring how ULIP works.
The returns in 15-year ULIP plans are achieved by assigning a part of your premium to give life insurance cover, and the rest of the money is invested in the fund options of your choice.
The ULIPs normally provide an array of options, such as a variety of equity and debt funds. You are also free to make a tailor-made investment portfolio by diversifying your investments between the various types of funds, depending on your risk tolerance. The returns will depend on how selected funds perform in the market.
The decision to invest in a ULIPs over a period of 15 years is a strategic move that offers a myriad of benefits that are not limited to financial security. Here we will cover the benefits of investing in a 15-year ULIP policy:
A 15-year ULIP will enable you to earn from the market growth either through investing in equity, debt, or a balanced fund. Your ULIP returns in 15 years will be based on how much your funds make, compared to traditional savings plans, since your money increases depending on the performance of the market.
You can change funds (like equity to debt) when investing in ULIPs, depending on the market factors or what you want to achieve. Your premium allocation can also be increased or decreased according to your risk appetite. For instance, if you are willing to take higher risks, you can allocate a greater percentage of your investment to equity for high ULIP returns in 15 years.
ULIPs not only assist in increasing your wealth but also offer you life insurance coverage, which will guarantee your family’s financial security. The sum assured will provide a cushion in case of an unfortunate event, and leave your loved ones to continue with the same standard of living and future planning.
The ULIPs are excellent for long-term wealth building due to the effect of compounding. When your ULIP returns are re-invested after 15 years, your investment increases at a greater rate. This compounding effect can make your savings go up, particularly when you are in high-performing funds.
The ULIPs are entitled to tax savings under Section 80C of the Income Tax Act. You will be able to claim a deduction on the premium paid up to ₹1,50,000 and claim a deduction on your taxable income.
Moreover, under Section 10(10D), no tax will be paid when you receive ULIP funds during partial withdrawal, surrender, or maturity. Such an exemption will only be applied if the premium is not more than 10% of the sum assured amount. In the case of ULIPs issued on or since 1 February 2021, one more condition is also applied: the annual premium should not exceed ₹2,50,000.
The ULIPs allow partial withdrawal after the mandatory lock-in period of 5 years, and this may prove useful in case of any emergency. This enables you to use your money when required, like medical bills and other emergency cases, without having to end the policy.
The ULIP returns in 15 years are calculated based on the Net Asset Value (NAV) of the funds in which your premiums are invested.
The formula to calculate absolute returns is:
ULIP Returns = [(Current NAV - Initial NAV) / Initial NAV] × 100.
You can also calculate the annual growth rate of your funds or the Compound Annual Growth Rate (CAGR) as follows:
CAGR of a 15-year ULIP = {[(Current NAV/ Initial NAV) ^ (1 / 15)] - 1} x 100
Here, NAV represents the per-unit market value of the fund at any given time.
It is important to note here that ULIP returns in 15 years depend on the type of funds you choose (equity, debt, or balanced) and how well those funds perform in the market. ULIPs also involve certain charges, such as fund management fees and policy administration fees. These are deducted before calculating returns.
ULIP returns also depend on the duration for which the funds are invested. Long-term investment in ULIPs, such as for 15 years, benefits from compounding. This means that your returns are reinvested to generate additional growth.
Let us assume you invest ₹1,00,000 per year in a ULIP plan for 15 years, and the expected rate of return is 10% per annum (compounded annually).
Using the future value formula for compounded growth:
FV=P×((1+r)n−1r)×(1+r)FV = P \times \left(\frac{(1 + r)^n - 1}{r}\right) \times (1 + r)FV=P×(r(1+r)n−1)×(1+r)
Where:
FV = 1,00,000×(0.1(1.1)15−1)×(1.1)
FV = 1,00,000×(0.14.177−1)×1.1
FV = 1,00,000×31.77
FV = ₹31,77,000
Thus, after 15 years, your investment could grow to approximately ₹31.77 lakh, assuming steady market performance and no withdrawals.
When you invest in a Unit Linked Insurance Plan (ULIP) for a long-term horizon of 15 years, several factors come into play that can significantly influence your final returns. Understanding these elements is crucial for making an informed decision and maximizing your wealth creation potential.
The performance of your ULIP is directly linked to the dynamics of the financial markets. The Net Asset Value (NAV) of the funds you’ve invested in will change based on market movements.
A 15-year investment horizon is generally sufficient to navigate short-term market volatility, especially if you are invested in equity funds, allowing your investment enough time to recover and grow.
The performance of your ULIP depends on the choice of your funds, and thereby, it is one of the most important decisions that you make.
For example, in case you are an aggressive investor and choose to maximize wealth in a period of 15 years, you can then invest a greater percentage of your premium in equity funds. On the other hand, balanced debt funds are more appropriate for a conservative investor.
Another thing to remember is that you should review the funds’ performance on a periodic basis and rebalance your portfolio if there is any change in your financial goals or risk tolerance.
The ULIPs come with a fixed charge which are either deductible from your premium or the fund value, and can affect your overall returns. The primary charges include:
These fees have the potential to consume your returns over 15 years. It will thus be a good idea to compare the various ULIPs and make a plan with a competitive and transparent charge structure in order to increase your long-term returns.
Maximizing your ULIP returns in last 15 years is not just about investing but making a strategy and being disciplined. Through the following strategies, you can increase the growth potential of investment to a great extent:
The key concept of this strategy is the ability to use the power of compounding. When you begin to invest early in life, you will provide your money with a longer opportunity to grow. The returns that you receive start to make their own returns that result in a snowball effect that has the potential to make you wealthy in a 15-year horizon.
ULIPs are long-term financial products. It is important to be invested throughout the policy term to reap the full benefits of market cycles and the force of compounding. Resisting the urge to make premature withdrawals is a sure way of having as long as possible to grow your money and to beat the temporary fluctuations of the market.
A ULIP gives you the choice to switch among funds. Monitor closely the performance of your selected funds and market environment. This can be done through a strategic move whereby you transfer some of your investment in equity when the market is high to secure profits, and when the market falls, you can switch to debt funds, maximizing returns.
Ensure that the kind of funds that you choose and the premium amount that you invest in are in line with your goals and the level of risk. For example, in the case where the risk profile is aggressive, a greater proportion towards the equity funds might be right. Also, you should look back and ensure that your investment plans are in line with your goals in order to accumulate wealth.
The ULIP investment for 15 years may be a good financial choice, though you have to make sure that you pick the appropriate plan, use your money wisely, and remain invested. Nevertheless, the charges and the fund selection are the aspects of ULIPs that should be considered to make the right choice. Over time, ULIPs have turned out to be even more investor-friendly, and with careful planning, it can assist you in meeting your long-term financial objectives, along with financially securing your loved ones.
1
The ULIP yields on 15-year and above plans are dependent on the kind of funds you invest in (equity, debt or balanced) and the performance of the market. For instance, equity-oriented ULIPs are in a position to pay higher returns than debt funds because of the increased risk.
2
The returns of ULIP are computed according to the Net Asset Value (NAV) of the funds one invests.
The formula is:
(Current NAV - Initial NAV) / Initial NAV × 100
3
The returns in ULIP are not assured because they are subject to market-based investments. Nonetheless, certain plans provide such features as capital protection or minimum assured benefits, which give a safety net.
4
The performance of the market is very important in determining the ULIP returns as they are tied to the equity and debt markets. Stable market expansion has the potential to increase returns. Conversely, volatility can cause variations.
5
When you give up a ULIP, you will risk losing out on the possibility of long-term compounding, along with paying surrender fees. Moreover, giving up prematurely can result in reduced returns because market cycles and growth opportunities are prevented.
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
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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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