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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
ULIP returns in 20 years can be a game-changer for your financial goals, mixing investment and insurance in one powerful package. Let’s dive into how a 20-year ULIP plan works, its benefits, and strategies to maximize your returns over time.
Before delving into the returns aspect, you need to first understand what is ULIP plan. A ULIP policy of 20 years is a smart financial product that combines life insurance and investment opportunities into one plan.
So, for 20 years, you pay your premium, and part of it is used for life insurance. If something ever happens to you, this amount will be given to your family as a lump sum payout. However, the rest of your amount is invested in funds of your choice, like equity, debt, or a balanced mix of both. This means your policy not only provides life coverage to financially protect your loved ones but also helps grow your wealth by investing your money in market-linked funds.
Now, you must be wondering why you should invest for 20 years. It is simple: time is your best friend when it comes to investments. Over such a long period, you can ride out short-term market ups and downs and take advantage of compounding (the process where your returns earn more returns). This makes a 20-year ULIP a powerful tool for achieving big goals like retirement savings, your child’s education, or even buying a home, all while ensuring your family’s financial security.
A ULIP plan works on the idea of acquiring more from a single plan. It is like a two-in-one deal, combining investment and insurance. Understanding how ULIP works is easier than it sounds, so let us understand:
Let us further understand with an example:
Imagine Saumya, a 35-year-old teacher, invests ₹3,000 per month in a 20-year ULIP. She chooses 60% equity funds for growth and 40% debt funds for stability. Over the years, the equity funds perform well, while the debt funds balance any market dips.
By the end of 20 years, Saumya’s investment grew to ₹12 lakhs. She receives this amount as a lump sum, which she uses to fund her child’s higher education while her family remains insured throughout the policy term.
A ULIP policy offers a unique blend of benefits that make it stand out as a smart investment plan for anyone looking to grow their wealth and secure their family’s future. Here is why it is worth considering:
ULIPs allow you to invest in market-linked funds like equity, debt, or a mix of both. This means your money has the potential to grow significantly over time, depending on market performance. Over 20 years, this long-term horizon helps you ride out short-term market volatility and enjoy higher returns.
ULIPs allow you to switch between funds during the policy tenure. You can choose where to invest your money based on your risk appetite and switch between funds as market conditions change. This helps you maximize your returns while adapting to financial goals and market trends.
For instance, if the stock market looks uncertain, you can switch from equity funds to debt funds to safeguard your returns.
Need money for a big expense, like your child’s education or a family emergency? With a ULIP, you do not have to worry. After the initial 5-year lock-in period, ULIPs let you withdraw a portion of your funds for emergencies or planned expenses without disrupting your policy.
One of the biggest benefits of ULIPs is the tax savings they offer:
This makes a ULIP plan not just a smart investment plan but also a tax-efficient one.
The 20-year tenure ensures disciplined savings, encouraging wealth accumulation over time. With the power of compounding and market growth, your ULIP returns in 20 years can help you meet significant financial goals like retirement, children’s education, or buying a home.
The return rates on a 20-year ULIP policy depend on factors like your premium amount, chosen investment funds, and market performance. Your premium is split into two parts: one for life insurance and the other for investments in equity, debt, or balanced funds.
ULIP returns are calculated based on the NAV (Net Asset Value) of your funds, which fluctuates with market performance. Over 20 years, consistent investments and fund growth contributes to wealth accumulation.
If you want to maximize returns, align your fund choices with your risk appetite, regularly review your portfolio, and consider adding riders for extra benefits. This way, your ULIP becomes both a long-term investment and a solid life cover.
Example:
If you invest ₹1,00,000 annually in a ULIP for 20 years and the fund grows at 8% per year, your investment could grow to over ₹50,00,000 (after accounting for charges).
Just like any other investment plan, ULIPs are beneficial for generating wealth and diversifying your financial portfolio. If you want to maximize ULIP returns in 20 years, as an investor, you must consider these strategies:
ULIPs are not get-rich-quick schemes. To reap the rewards of compounding, you need to stay invested for a long time. The longer your money stays invested, the more it compounds, so avoid any early withdrawals.
Choose a mix of funds that align with your financial goals and risk tolerance. Diversify across equity, debt, and hybrid funds to balance risk and returns. This diversification of your investments can help alleviate risk.
ULIPs come with various charges, such as premium allocation charges and fund management charges. Understand these costs and how they affect your returns. This will help you compare plans and choose one with lower costs.
Periodically review your ULIP portfolio. If your financial objectives or risk tolerance change, consider switching between funds to keep your strategy aligned.
ULIPs typically come with a lock-in period of five years, but it is actually a blessing in disguise. It ensures you stay invested long enough to ride out short-term market fluctuations and build a disciplined savings habit.
ULIP returns in 20 years can be a powerful tool for achieving both financial security and wealth growth if you play your cards right. It is a flexible financial tool that combines insurance protection with investment potential. A well-thought-out strategy can help you attain your long-term financial goals.
So, if you are in it for the long haul and looking for an investment plan that offers flexibility, tax benefits, and market-linked growth, a ULIP plan might be the perfect choice for you!
1
The returns depend on the market performance and the funds you choose. Historically, equity-based ULIPs have delivered 8-12% annual returns over long periods. Your actual returns will also depend on factors like premium allocation charges, fund management fees, and your investment strategy.
2
Returns are calculated based on the NAV of your chosen funds. The longer your money stays invested, the more it benefits from compounding and market growth.
3
No, ULIP returns are not guaranteed because they are tied to market performance. However, they offer higher growth potential compared to traditional insurance plans.
4
Key factors that influence ULIP returns are:
5
Historically, well-managed ULIPs have delivered competitive returns, particularly for equity-based funds. The long-term horizon of 20 years smoothens market volatility and enhances growth potential.
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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