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Understanding ULIP Returns in 10 Years
Table of Content
In this policy, the investment risks in the investment portfolio is borne by the policyholder
Every young Indian aspires to save and invest for a financially secure future. Unit-Linked Insurance Plans (ULIPs) can help you fulfil your long-term goals while protecting your family’s finances. ULIPs are life insurance policies that offer the dual benefit of investment and insurance, available to both residents and non-residents through options like ULIP for NRI. You agree to pay a one-time or regular premium to an insurance company. They use a portion of the amount to provide life coverage. They invest the rest on your behalf in various funds based on your risk appetite. ULIPs come with a lock-in period of five years, but the longer you stay invested, the better. Let’s better understand 10-year ULIP plans and how they can work for you.
What Is a 10-Year ULIP Policy?
As the name suggests, a 10-year ULIP is a plan that provides life coverage for a decade. While the policy is active, you can invest in various debt and equity funds based on your risk appetite. Over ten years, depending on market fluctuations, you can build a significant corpus to help you fulfil your long-term financial goals. Additionally, the plan provides your family with financial security with life coverage. Should anything happen to you during the policy term, your beneficiary or heir receives the payout of the sum assured. You can select the amount based on your Human Life Value (HLV) and expected financial obligations.
How Does a 10-Year ULIP Policy Work?
A 10-year Unit-Linked Insurance Plan (ULIP) is an insurance product with two components i.e., life coverage and investment. In contrast to short-term plans, a 10-year ULIP gives sufficient time for steady 10-year ULIP investment growth while balancing the risks associated with market uncertainty.
The premium is utilised for life coverage and for investing in market-related funds of your choice. You may choose debt funds, equity, or balanced funds depending on your risk profile. With the compounding effect in long-term investments and the flexibility to switch funds, the ULIP returns in 10 years will be substantial.
Here is an example to show how a 10-year investment in ULIPs works:
Avinash, a bank employee, prudent in financial planning, opted for a 10-year ULIP for long-term financial goals and life coverage with a single premium. He chose a mix of equity and debt funds, aligning with his goals and risk profile to balance the risk. The ULIP investment earned substantial returns for him while protecting his family against uncertainties.
Why Choose a 10-Year ULIP Policy?
Opting for a 10-year ULIP offers many benefits. Here’s why you should consider purchasing a policy:
Market-linked Returns
ULIPs allow you to invest in debt and equity instruments. Market-linked investments have the potential to provide higher returns than traditional savings.
Flexibility
ULIPs provide the flexibility to choose your investment avenues and make switches based on market conditions. Some ULIPs limit the number of switches during the policy tenure, while others allow unlimited changes. Ensure you select a plan that meets your investment strategy.
Tax Benefits
ULIPs fall under the EEE or exempt-exempt-exempt category subject to the provisions of the Income Tax Law. The amount you invest enjoys tax deductions under Section 80C# of the Income Tax Act.
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.
Death proceeds are also exempt from tax for all ULIP plans.
Life Coverage
Your ULIP policy offers life coverage, providing your loved ones with financial security and stability, regardless of what happens to you.
Long-term Investment
With ULIPs, the longer you stay invested, the better. Your ULIP returns in 10 years will be much better than returns over five, eight, or even nine years. A 10-year ULIP helps you build a corpus for your long-term financial goals.
How Are 10-Year ULIP Policy Return Rates Calculated?
The market performance depicts the returns on ULIP policies over 10 years. The Net Asset Value is calculated daily, and the yield depends on the changing NAV. The ULIP Policy return rates are calculated as follows:
ULIP Fund Investment
A portion of the premium after deducting ULIP charges, is invested in buying fund units of your choice. It can be in equity, debt funds, or both. You are allowed to switch funds during the policy term depending on the market fluctuations.
Net Asset Value (NAV)
The Net Asset Value is the price of a ULIP fund unit at a given time. It keeps changing and is calculated every day, and helps in monitoring the market performance by comparing the past performance. The formula to calculate NAV is
NAV = (Market Value of Assets- Liabilities) / Total Outstanding Units
The liabilities in this formula denote the various expenses and charges collected.
10-Year Return
The Compound Annual Growth Rate (CAGR) method provides the annual growth rate is the perfect method for ULIP return analysis Over 10 Years.
The formula is:
CAGR = {[(Current NAV / Initial NAV) ^ (1 / Number of years)] - 1} * 100.
The Current NAV is the value at the end of 10 years.
The Initial NAV is the value on the date of purchase.
The number of years is 10.
ULIP Flexibility
The following flexibility offered in 10-year ULIP policies makes it the most suitable option to align with your changing goals and risk profile:
- Top-ups to increase your investment at any time during the policy term. Please check
- Make partial withdrawals after a 5-year lock-in period.
- Choose between single or regular premium payments.
Key Factors Affecting ULIP Returns in 10 Years
The elements affecting ULIP returns in 10 years are:
Market Fluctuations
Market volatility varies the ULIP growth rate. However, the 10-year investment horizon for ULIPs provides the space to recover from short-term market downturns and enables steady growth.
Fund Selection
The right fund selection is crucial to generate the expected returns. Equity funds offer high returns but pose high risks. Choosing debt funds might be less risky, but it slows down the growth rate. The ideal pattern is to switch funds depending on the market trends to mitigate risk and balance losses.
Charges That Impact Returns
The ULIP charges deducted from the premium before investing in the chosen assets reduce the returns to some extent. The various charges are:
- Fund Management Charges
- Premium Allocation Fees
- Policy Administration Costs
- Mortality Charges
- Switching Charges
- Surrender or Discontinuation Charges
These charges reduce over a period, so staying invested for longer fetches better returns.
FAQs on ULIP Returns in 5 years
Q. Can I withdraw my ULIP investment before 10 years?
Yes. You can make partial withdrawals in ULIP investment before 10 years, but only after a 5-year lock-in period, with limitations on the amount you are allowed to withdraw annually. However, pulling out a part of your investments before 10 years can considerably lower the eventual returns.
Q. What are the average ULIP returns over a 10-year period?
The ULIP returns over 10 years depend on the fund selection and the market performance. While equity funds offer high returns, debt funds are more stable. However, the typical range of ULIP returns is 8 to 12%. Long-term investing in ULIP hedges the impact of short-term market fluctuations.
Q. How do market conditions impact ULIP returns in 10 years?
The market conditions affect ULIP returns in 10 years. A bullish trend in stocks and bonds indicates a strong market, and the returns are higher. During a bearish environment, the performance is sluggish and depreciates the returns. A long-term investment neutralises the short-term market downs and stabilises the returns.
Q. How to calculate ULIP maturity value after 10 years?
To calculate the ULIP maturity value after 10 years, use the formula CAGR = {[(Current NAV / Initial NAV) ^ (1 / Number of years)] - 1} * 100, where the current value is the value of the units at the end of 10 years, the initial value is the value of the units on the date of purchase, and the number of years is 10 years.
Q. Are ULIP returns in 10 years sufficient for long-term goals?
Yes. ULIP returns in 10 years are sufficient for long-term goals such as children’s education, retirement planning, buying a house, etc. However, it is better to use the ULIP calculator to assess how much monthly investment is required to create the corpus required for your long-term financial goals.
Q. Is it safe to rely on ULIP returns from the last 10 years for planning?
A study of past ULIP performance gives an insight into how a fund has performed. However, it does not guarantee future returns. You can use the historical performance of a fund as a guide to your investment. You can control the returns by reviewing the performance and switching funds periodically, depending on the market trend to suit your goals and risk appetite.
Related Article
- Know When is the Right Time to Switch Your ULIP Fund
- Mortality Charges in ULIPs - How Are They Calculated?
- Check Details on Loan Against ULIP Policy
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Francis Rodrigues
Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.
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NOTE: This material has been prepared for information purposes only, should not be relied on for financial advice. You should consult your own financial consultant for any queries.
# Subject to conditions specified u/s 80C and u/s 10(10D) of the Income Tax Act, 1961.
The afore stated views are based on the current Income-tax law. Tax Laws are also subject to change from time to time. Also, the customer is requested to seek tax advice from his Chartered Accountant or personal tax advisor with respect to his personal tax liabilities under the Income-tax law.
The Unit Linked Insurance products do not offer any liquidity during the first five years of the contract. The policyholders will not be able to surrender or withdraw the monies invested in Unit Linked Insurance Products completely or partially till the end of fifth year.
Unit Linked Life Insurance products are different from the traditional insurance products and are subject to the risk factors. The premium paid in Unit Linked Life Insurance policies are subject to investment risks associated with capital markets and the NAVs of the units may go up or down based on the performance of fund and factors influencing the capital market and the insured is responsible for his/her decisions. HDFC Life Insurance Company Limited is only the name of the Insurance Company, The name of the company, name of the contract does not in any way indicate the quality of the contract, its future prospects or returns. Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document of the insurer. The various funds offered under this contract are the names of the funds and do not in any way indicate the quality of these plans, their future prospects and returns.
** The returns mentioned is the 5-year benchmark return percentage of Nifty Alpha 50 index data as of April 30, 2025, and is not indicative returns of HDFC Life’s Top 300 Alpha 50 fund(SFIN:ULIF07828/02/25Alpha300Fd101) Source: https://www.niftyindices.com/Factsheet/Factsheet_Nifty_Alpha50.pdf
18. Save 46,800 on taxes if the insurance premium amount is Rs.1.5 lakh per annum and you are a Regular Individual, Fall under 30% income tax slab having taxable income less than Rs. 50 lakh and Opt for Old tax regime
ARN - MC/05/25/23315