ULIP Returns in 35 Years

 

In this policy, the investment risks in the investment portfolio is borne by the policyholder

Every young Indian today invests to secure their financial future. Unit-Linked Insurance Plans (ULIPs) provide investment opportunities while providing life insurance coverage, making these plans popular. ULIPs have the potential for high returns, enabling young investors to meet their long-term financial goals. Let's better understand how a ULIP investment for 35 years can benefit you.

What Is a 35-Year ULIP Policy?

A 35-year ULIP policy is a type of ULIP investment plan that provides insurance coverage for 35 years. When you purchase a ULIP for 35 years, you can grow your wealth over 35 years while enjoying life insurance coverage. The policy lets investors choose from various investment options, such as equity, debt, or a mix of both, based on their investment goals and risk appetite.

How Does a 35-Year ULIP Policy Work?

When you invest in a 35-year ULIP policy, you pay a premium at regular intervals for 35 years. The premium you pay gets divided into two parts. The smaller amount goes towards your insurance coverage, and the rest gets invested in various funds based on your investment choice.

The insurance company determines the maximum life coverage you have receive by evaluating your age, current health, premium amount, and income. If anything happens to you during the 35 years, your nominee receives a payout. The amount will be either the sum assured or the current fund value, whichever is higher. We can better understand how a 35-year ULIP works with an example. Meeta, a 25-year-old banker, decides to invest in a 35-year ULIP with a sum assured of INR 50 lakhs. She pays an annual premium that gets invested in a mix of equity and debt funds to help her meet her retirement goals. Over the next 35 years, Meeta invests regularly and rests assured that her family will receive financial support if anything happens to her. After she turns 60, Meeta's plan matures, and she gets a return on her investment.

Why Choose a 35-Year ULIP Policy?

Opting for a 35-year ULIP offers many benefits. Here’s why you should consider purchasing a long-term plan.

• Market-linked Returns

  ULIPs provide market-linked returns on your debt and equity fund investments, helping you enjoy good returns based on market performance.

• Flexibility

  When you invest in a ULIP, you can choose your fund portfolio and make switches to take advantage of market fluctuations. Some companies restrict the number of switches, so pick a plan that works for you.

• Tax Benefits

  ULIPs are insurance plans and provide tax benefits under Section 80C^# and Section 10(10D) of the Income Tax Act of 1961, subject to certain conditions

  The premiums paid towards ULIP policy are eligible for tax benefits under Section 80C^# of the Income Tax Act, 1961.

  Proceeds received on surrender/partial withdrawal/maturity of ULIP plan are exempt from tax subject to provisions mentioned in Section 10(10D)^# i.e if the premium payable for any of the years during the policy term does not exceeds 10% of the death sum assured.

  In addition to the above, for policies issued after 1st Feb 2021 tax exemption on maturity proceeds will be available if premium paid in any of the years towards such matured polices does not exceed Rs.2,50,000. Out of the total matured policies in a financial year, exemption u/s 10(10D) will be available only towards those polices who’s aggregate premium in any years does not exceed Rs. 2,50,000/.

  Income from rest of the policies exceeding the mentioned limit will be chargeable as capital gains.

  ULIP plans offer tax exemptions on the life insurance payout.

• Life Coverage

  Your ULIP policy offers life coverage, providing your loved ones with a financial safety net in times of need.

• Long-term Investment

  When you invest, the longer the tenure, the better. Your ULIP returns in 35 years will be much better than shorter investment periods of 15 or 20 years. These plans help you meet your long-term financial goals.

• Partial Withdrawals

  Insurance companies allow policyholders to make partial withdrawals after the lock-in period of five years. You can dip into the accumulated funds in financial emergencies.

How Are 35-Year ULIP Return Rates Calculated?

The ULIP rates for a 35-year policy depend on the premium amount, premium payment frequency, and the proportion of premium allocated towards insurance coverage and investment. The premium amount gets invested in the chosen funds. You receive the generated returns on maturity based on your payout option.

ULIP policies typically have four types of charges. They are premium allocation, fund management, mortality, and policy administration charges. These charges get deducted from the premium amount before investing in the funds.

To calculate the returns for a 35-year ULIP policy, the insurer considers the prevailing market conditions, the performance of the underlying funds, and the impact of charges on the premium amount.

A 35-year ULIP policy can help you create long-term wealth while providing life cover and tax benefits. With the flexibility to switch funds and the potential for high returns, a 35-year ULIP policy is a great investment option for individuals looking to invest for the long term. Consulting a financial advisor can help you make informed investment decisions and choose the right ULIP policy that meets your financial goals.

Related Article

• Investing in ULIP Plans - Things You Must Know
• Complete Comparison of ULIP Plans
• Meaning of Sum Assured in a ULIP

ARN - MC/06/23/2605