ULIP Returns in 15 Years

Table of Content

1. What Is a 15-Year ULIP Policy?

2. How Does a 15-Year ULIP Policy Work?

3. Why Choose a 15-Year ULIP Policy?

4. How Are 15-Year ULIP Policy Return Rates Calculated?

5. Key Factors Affecting ULIP Returns in 15 Years

6. FAQs on ULIP Returns in 15 years

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

Most young people today want to invest and grow their wealth. We’re sure you have several dreams you’d like to achieve. Smart financial decisions today enable you to meet your goals. A Unit-Linked Insurance Plan (ULIP) helps you invest for the future while protecting your family’s finances in the present. Let’s learn more about ULIPs and how a ULIP investment for 15 years can help you achieve your goals.

What Is a 15-Year ULIP Policy?

A 15-year ULIP lets you invest in various market-linked funds for 15 years while providing you with life coverage. Since ULIPs are insurance plans, you pay a regular premium. You decide whether to pay monthly, quarterly, biannually, or annually. The amount gets split into two parts. A small portion goes towards the insurance company’s charges and provides you with life coverage. The company invests the rest in various market-linked funds. Although the insurance company manages the investment, you can choose the funds based on your risk appetite.

How Does a 15-Year ULIP Policy Work?

A 15-year ULIP gives investors the dual benefit of life coverage for the policy period while also investing in market-linked funds. A portion of the premium is assigned for life cover and the rest for wealth building through market-related investments. The long-term ULIP investment returns depend on market sentiment, fund choice, and expenses incurred.

Aniket made an annual investment of Rs. 1.00 lakh in the ULIP Policy. He allocated 20% for debt funds and 80% for equity funds. Though Aniket chooses the funds, it is managed by fund managers for a fee, which saves him the hassle of juggling with the investment. He benefits from the ULIP returns over 15 years, along with life cover for the entire period.

Why Choose a 15-Year ULIP Policy?

A 15-year ULIP provides several benefits. Let’s learn more.

• Market-linked Returns

  ULIPs allow you to invest in market-linked debt and equity instruments. They could potentially provide high returns, helping you meet your goals.

• Flexibility

  ULIPs provide lots of flexibility. You can choose the sum assured and the investment avenues based on your risk appetite. Most plans today also let you make fund switches to make the most of market fluctuations. This flexibility extends to various investor profiles, with options like ULIP for NRI catering to non-resident Indians. Some insurance companies limit the number of changes you can make, so choose a plan accordingly.

• Tax Benefits

  ULIPs offer tax benefits under Section 80C^# and Section 10(10D) of the Income Tax Act. The amount invested enjoys deductions 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.

  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

  The longer you stay invested, the more time you have to let your money grow. Your ULIP returns in 15 years will be much better than returns over five or ten years. These long-term investments help you build financial discipline while enabling you to meet your long-term goals.

How Are 15-Year ULIP Policy Return Rates Calculated?

The 15-year ULIP returns projection depends on how well the investment works for you and is assessed with the daily updation of Net Asset Value.

ULIP Fund Investment

The premiums allocated for market-linked assets are invested in diverse funds of your choice, such as equity, debt, or balanced funds. How well the investment performs impacts the expected returns from ULIP in 15  years. 

Net Asset Value (NAV)

The value of each fund unit is Net Asset Value or NAV. The formula to calculate the NAV is:

Net Asset Value (NAV)= (Total Value of Assets- Liabilities) /Number of Outstanding Units.

The NAV is calculated daily to track the fund's performance and the potential value of your investment.

15-Year Return

You can calculate the annualised return rate with the formula:

CAGR = {[(Current NAV / Initial NAV) ^ (1 / Number of years)] - 1} * 100.

The current value is the future value (i.e., the predicted value at the end of 15 years). Initial NAV is the unit value at the time of purchase, and the number of years is 15 years. 

The ULIP returns in 15 years depend on the funds’ choice and the ULIP charges collected. 

ULIP Flexibility

ULIP offers certain flexibility that works to your advantage. It allows you to change your investment strategy to align with the market trend, your financial goals, and risk tolerance levels.

Key Factors Affecting ULIP Returns in 15 Years

You should be aware of the following pointers for an informed decision concerning ULIP investments:

Market Fluctuations

The market dynamics change the graph of ULIP returns over 15 years. Equity funds fetch high returns but are risky. Debt funds are less risky and generate lower but stable returns.  Understanding the market sentiments and investing prudently can be a game-changer. 

Choosing the Right Funds

The right fund selection is crucial to minimise market-linked investments losses. Select funds to align with your goals and risk appetite. Review and readjust periodically for building wealth with ULIPs over 15 years. 

Charges That Impact Returns

You incur several charges for ULIP investments. They are — policy administration charges, fund management charges, premium allocation fees, and mortality charges. These charges impact your overall returns. Choosing a ULIP fund with minimum charges enhances the overall returns.

FAQs on ULIP Returns in 15 years

Q. Can I withdraw my ULIP investment before 15 years? 

Yes. Partial withdrawals are allowed in your ULIP investments after the 5-year lock-in period. Part withdrawals impact the maturity value as they reduce the overall returns. Consider this aspect before you pull out funds from ULIP before maturity. 

Q. What are the average ULIP returns over a 15-year period? 

ULIPs with a 15-year timeline plan have the potential to fetch annualized returns of 10% to 12%, depending on market conditions and fund performance. Regular premium payments and long-term investments enhance the probability of higher returns.

Q. How do market conditions impact ULIP returns in 15 years?

The market conditions impact ULIP returns in 15 years. A booming market enhances the NAV and fetches higher returns, while a weaker market reduces the NAV and the returns as well. 

Q. How to calculate ULIP maturity value after 15 years? 

Consider the NAV of the units at the end of 15 years, i.e., on maturity and the number of units held. Multiplying the NAV by the number of units held gives the maturity value. However, the ULIP charges must be considered to arrive at the maturity value. 

Q. Are ULIP returns in 15 years sufficient for long-term goals?

ULIPs held for longer periods are suitable financial tools to achieve long-term financial goals, such as retirement planning, buying a home, etc. The returns are ploughed back to generate more returns. This compounding effect helps your money grow exponentially in 15 years, making the ULIP returns in 15 years sufficient for long-term goals.

Q. Is it safe to rely on ULIP returns from the last 15 years for planning? 

The past growth trends of ULIP funds can be a road map to understanding the fund's performance before investing. However, considering the current market position and the fund performance is crucial for an informed decision to achieve the desired returns.

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