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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
A 5-year ULIP combines life insurance coverage with market-linked investment opportunities, offering potential ULIP returns in 5 years. It provides benefits like wealth creation, tax savings, flexibility in fund allocation, and transparency. The 5-year lock-in period encourages disciplined investing while ensuring financial protection for your family.
A 5-Year ULIP is a specific type of ULIP that comes with a minimum lock-in period of 5 years. In this lock-in period, policyholders are limited from making partial withdrawals or surrendering the policy.
Like all ULIPs, it offers a combination of life insurance coverage and investment potential. A portion of your premium goes towards providing life cover for your beneficiaries in case of your unfortunate demise during the policy term. The remaining premium is invested in the market-linked funds you chose.
Whether you are looking to secure your post-retirement life with a ULIP retirement plan or aim to achieve long-term financial goals, understanding how ULIP works for 5 years will help you make the right financial choices.
You start by paying regular premiums towards your ULIP returns in 5 years. The premium amount can be chosen based on your financial goals and risk appetite. You can estimate it using online ULIP calculator.
You have the flexibility to allocate your premium across different funds offered by the insurance provider. These funds can range from equity-oriented funds with higher risk to debt-oriented funds with lower risk or a combination of both.
The 5-year lock-in period means that you cannot withdraw your investments during this time. This restriction is imposed to encourage long-term wealth accumulation.
The ULIP returns in 5 years will depend on the performance of the underlying funds. Since ULIPs are market-linked, your returns can vary based on the performance of the chosen funds.
Let’s say you invest in a 5-year ULIP where you pay ₹1 lakh premium annually for a sum assured of ₹10 lakhs. A portion of the premium will go towards the insurance, and the remaining amount will be invested in a mix of equity and debt funds based on your chosen fund option.
Over the 5 years, your money will grow based on the market performance of these funds. At the end of 5 years, you will get the fund value, which is the accumulated amount after all charges and market growth. Additionally, if something unfortunate happens during the policy term, your family will receive a payout of ₹10 lakhs or the fund value, whichever is higher.
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.
As an investor, you deserve to know where your money is going. That’s why ULIPs empower you with transparency and offer detailed statements about:
This openness builds trust and confidence, helping you stay in control of your investment.
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-year 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.
The performance of your ULIP investment is tracked by the Net Asset Value (NAV) of the underlying funds. NAV represents the market value of the fund’s assets minus its liabilities per unit.
| NAV = (Total Assets in the Scheme – Total Liabilities in the Scheme) / Total Units Outstanding |
So, if the NAV of the fund goes up, the value of your investment increases.
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.
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 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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