ULIP Returns in 25 Years

 

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

As the cost of living continues to rise, you must plan and invest in your future. One way to do so is through a Unit-Linked Insurance Plan (ULIP) for 25 years. The policy helps individuals create a secure financial future by investing in various market-linked funds for 25 years. During the policy tenure, the investor receives life coverage, offering financial security to their loved ones. Let’s better understand these plans and how they can help you fulfil your goals.

What Is a 25-Year ULIP Policy?

Insurance companies offer 25-year ULIP plans as a comprehensive insurance-cum-investment policy for long-term financial goals. You pay regular premiums that get split into two. One part goes towards providing life coverage and pays for the company’s administrative and fund management charges. The rest gets invested in various funds. You can select the fund allocation based on your risk appetite and future financial goals.

How Does a 25-Year ULIP Policy Work?

Investing in a ULIP for 25 years helps you meet your long-term financial goals. Let’s better understand how a ULIP investment for 25 years works with an example. Vikram, a 35-year-old software engineer, purchased a 25-year ULIP and selected a sum assured of Rs. 1 crore. Vikram wanted to build a corpus to help him and his wife after retirement. Vikram decided to purchase a Waiver of Premium rider with his ULIP. Unfortunately, Vikram met with a fatal accident at 48. His wife received the sum assured payout of Rs. 1 crore, which helped her maintain her standard of living and pay off their outstanding debts. The insurance company waived off all future premiums and kept the plan active. After 25 years, his wife received the maturity amount, which helped her remain financially independent in her retirement.

Why Choose a 25-Year ULIP Policy?

Opting for a 25-year ULIP offers many benefits. Here’s why you should consider purchasing such a plan.

• Market-linked Returns

  ULIPs allow debt and equity market-linked investments. These investments can provide higher returns than traditional savings plans.

• Flexibility

  ULIPs provide the flexibility to choose your investment avenues and make switches based on market conditions. Additionally, ULIPs allow partial withdrawals in financial emergencies.

• Tax Benefits

  ULIPs fall under the EEE or exempt-exempt-exempt category, so you enjoy tax exemptions and deductions under Section 80C^# and Section 10(10D) of the Income Tax Act of 1961 subject to the conditions mentioned in 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 during a difficult time.

• Long-term Investment

  The longer you stay invested in a ULIP, the better. ULIP returns in 25 years will likely be better than returns over five or ten years.

How Are 25-Year ULIP Policy Return Rates Calculated?

ULIP policy rates depend on the policy tenure, the fund allocation and market fluctuations. Since ULIPs invest in market-linked funds, the return rate depends on market performance. While trying to project your returns, you must consider the insurance company’s fees. Remember, they deduct a portion of your premium to provide life coverage and take care of their fund management and administration costs, which lowers your investment amount. You can use an online ULIP calculator to understand your estimated returns before investing.

A 25-year ULIP policy is a great investment option for individuals who want to secure their financial future. It offers life insurance coverage and the potential for higher returns through market-linked investments. Policyholders can switch between funds and add riders to the policy, making it a flexible investment option. However, it’s important to note that ULIPs are subject to market risks, and the returns are not guaranteed.

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ARN - MC/05/23/2056