ULIP Returns in 20 Years

 

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

Every good financial plan includes investment and life insurance coverage. Unit-Linked Insurance Plans (ULIPs) combine the benefits of both under a single policy. ULIPs enable you to invest in market-linked funds while providing life coverage to safeguard your family’s finances. A 20-year ULIP helps you meet your long-term goals. Let’s better understand how these policies work.

What Is a 20-Year ULIP Policy?

A 20-year ULIP policy provides life cover for 20 years. If the policyholder dies within the 20-year term, their family will receive a lump sum payout. In addition to life coverage, the 20-year ULIP policy allows the policyholder to invest in various fund options, such as equity, debt, or balanced funds. The premium paid towards the policy is divided between the life cover and the investment, providing a dual benefit. Investors can choose the fund allocation based on their risk appetite and future financial goals.

How Does a 20-Year ULIP Policy Work?

Let’s understand how a ULIP for 20 years works with an example. Thirty-year-old Rahul is about to become a father. He wants to ensure that his child can take advantage of every opportunity. Rahul decides to invest to finance his child’s higher education. Assuming his child wants to go overseas for a master’s degree, he purchases a 20-year ULIP. Every month, Rahul invests a portion of his income in the ULIP. Part of the amount goes towards providing him with life coverage. The rest gets invested in the funds he selected. Rahul’s son decides to start his own business at 21. The corpus Rahul accumulated over 20 years through the ULIP allows his son to achieve this goal.

Why Choose a 20-Year ULIP Policy?

Let’s see how a ULIP investment for 20 years benefits you.

• Market-linked Returns

  ULIPs let you invest in market-linked equity and debt funds. You can select a balanced fund that invests in both to diversify your portfolio. Market-linked plans often provide higher returns than traditional low-risk savings.

• Flexibility

  ULIPs allow policyholders to choose their investment funds and make switches to take advantage of market fluctuations. Investors who understand the market can trigger fund changes to boost their returns.

• Partial Withdrawals

  ULIPs allow partial withdrawals in financial emergencies. Policyholders can liquidate some funds to help pay for their child’s education or marriage without exiting the plan.

• Tax Benefits

  ULIPs offer multiple tax benefits under Section 80C^# and Section 10(10D) of the Income Tax Act of 1961. 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 20 years will be much better than returns over five to ten years. A 20-year ULIP helps you build a corpus for your long-term financial goals.

How Are 20-Year ULIP Policy Return Rates Calculated?

The rates of a 20-year ULIP policy depend on the policyholder’s age, the sum assured, the chosen premium amount, and the selected investment funds. The premium amount gets divided between the life cover and the investment. The returns on the investment depend on the performance of the chosen market-linked funds.

A 20-year ULIP policy helps you build wealth for your long-term goals while securing your family’s future with life coverage. These plans offer market-linked returns, so policyholders must evaluate their risk appetite and goals before selecting a policy. Always check the plan terms and enhance your coverage, if possible, with riders.

Related Article

• How to Choose the Best ULIP Plan in India?
• All You Need to Know About Insurance Types, Portability & Its Benefits
• Absolute Returns in ULIPs: Everything You Need to Know

ARN - MC/05/23/2055