ULIP Returns in 20 Years: What You Need to Know About Long-Term Growth and Life Cover

ULIP Returns

ULIP returns help you grow your money over time. When you choose a ULIP, you get two benefits together. One part of your money is used for life insurance. This keeps your family safe financially if something happens to you. The other part of your money is used in market-linked funds. These funds can be in equity (shares), debt (loans), or a mix of both.

ULIP returns depend on how well the market performs. If the market grows, your returns can grow too. That is why ULIPs are good for long-term goals. Staying in the plan for 20 years can help you see better returns, thanks to something called compounding, where your earnings start growing over time.

You also get to switch between different funds if you want. For example, you can move from equity to debt if the market feels risky. This makes ULIPs flexible.

So, ULIP returns are not fixed or guaranteed, but with time and patience, they can help you build wealth. They also give peace of mind by protecting your loved ones financially.

What is the 20 Years ULIP Policy?

A 20-year ULIP policy is a plan that gives you life cover and helps your money grow. Here is how it works, explained in simple points:

• You buy a ULIP plan for 20 years and pay money regularly (monthly or yearly).
• Part of your money goes to life insurance. It protects your family financially if something happens to you.
• The rest of your money goes into funds like equity (high return, high risk), debt (low return, low risk), or a mix.
• You can choose which type of fund you want based on your comfort with risk.
• You are allowed to switch funds during the policy term if the market conditions change.
• You must stay in the plan for at least 5 years before taking any money out (called the lock-in period).
• The maturity value is not fixed or guaranteed. Charges (like mortality, fund management, policy administration) will be deducted from the fund value. Also, returns earned are subject to market risk.
• You can use this money for big goals like your child’s education, retirement, or buying a house.
• ULIPs also offer tax benefits under Sections 80C under old tax regime and 10(10D) subject to certain conditions.
• This policy helps you save, grow your money, and protect your loved ones financially—all in one plan.

List of ULIP Funds

ULIP funds are where your money goes when you buy a ULIP policy. These funds grow with the market, and you can choose from different types based on how much risk you want to take and what your goals are. The main types of ULIP funds are equity, debt, and balanced funds.

Equity funds invest mostly in company stocks. They have a high chance of growth, but also come with a higher risk because stock prices can go up and down a lot. If you want higher returns and can handle ups and downs, equity funds are good for you.

Debt funds invest in safer options like government bonds and corporate bonds. These are low-risk investments and usually give steady but smaller returns compared to equity funds. If you want to avoid big losses and prefer low risk, debt funds are better.

Balanced funds mix both equity and debt investments. They try to balance risk and return by investing part of your money in stocks and part in bonds. This is good if you want moderate growth with less risk than pure equity funds.

When choosing a ULIP fund, it is important to look at the fund size, the Net Asset Value (NAV), and past returns. NAV shows the value of one unit of the fund. Past returns can give you an idea of how the fund has performed, but remember, returns are not fixed and depend on market performance. Past performance of funds are not indicative of future performance

You can also switch between funds during the policy term to adjust your investment based on market conditions or your changing risk appetite.

Here is a simple table showing common ULIP fund types:

People who want quick access and very low risk

By understanding these fund types, you can pick the one that fits your goals and how much risk you want to take. Always check the fund details before investing.

How Does 20 Years ULIP Policy Work?

A 20-year ULIP policy is like a two-in-one deal. It gives you life insurance and also grows your money through market-linked funds. When you buy the policy, you start paying premiums—either every month, quarterly, or once a year. A part of this premium goes into a life cover. This ensures your family gets money if something happens to you during the 20 years.

The other part of your premium goes into funds that grow your money. You get to choose from equity (higher returns, more risk), debt (safer, lower returns), or balanced funds (a mix of both). You can switch between these funds anytime, based on your comfort with risk or how the market is doing.

Your money grows based on the performance of these funds. Over 20 years, your investment has a chance to grow big, especially if the market does well. After the 5-year lock-in period, you can also make partial withdrawals for important needs.

At the end of the policy, you get the full value of your investment (called maturity benefit). It is a smart way to save for big goals while keeping your family financially safe with life insurance.

Maturity Outcome

Here’s what happens when your 20-year ULIP policy ends:

• You receive the full value of your ULIP fund—this is called the maturity benefit.
• You can choose to take the money all at once (lump sum) or in parts (installments), depending on your plan.
• This money can be used for your child’s college, your retirement, or buying a house, etc.
• Your family stays protected with life cover until the end of the policy.
• If something happens to you before the policy matures, your family will receive the life insurance amount.
• Because you stayed invested for 20 years, you may benefit from the power of compounding—your returns may earn even more returns.
• You can also add riders at additional cost (extra benefits) to enhance your policy.
• This maturity payout helps you meet big goals with peace of mind.

Benefits of Choosing a 20-Year ULIP Policy

A 20-year ULIP is a strong option if you want long-term growth with protection.

• Market-Linked Returns

  
  Your money grows along with the market. This gives you a chance to earn more than traditional plans. Over 20 years, ups and downs in the market can balance out and help your money grow.

• Flexibility

  
  You can switch between equity and debt funds. If the market is doing well, you can move more money into equity. If you want to be safe, you can shift to debt. This gives you control over how your money grows.

• Partial Withdrawals

  
  After 5 years, you can take out some money for big needs like your child’s fees or medical help. This helps in emergencies without stopping the policy.

• Tax Benefits

  
  
  • Section 80C: You can claim up to Rs. 1.5 lakh tax deduction per year under old regime.
  • Section 10(10D): Maturity amount may be tax-free (subject to certain conditions).
  
  

• Long-Term Investment

  
  Staying on the plan for 20 years builds the habit of saving. In ULIPs, compounding is influenced by market-linked fund returns and charges.

Why Should You Choose a 20-Year ULIP Policy?

• It gives dual benefits: life cover and returns.
• It helps save taxes.
• You can change your fund type when needed.
• Long-term saving builds wealth slowly and safely.
• It supports big goals like home buying, education, or retirement.

How are Return Rates Calculated on 20 Years ULIP Policy?

ULIP returns are based on:

• Age and premium amount
• Market performance
• Type of fund chosen
• NAV (Net Asset Value) changes over time
• Staying in the policy for the full 20 years

Returns can be higher with equity but come with more risk. Debt funds are safer but may grow more slowly. Mixing both helps balance risk and reward.

Conclusion

A 20-year ULIP policy can give you life cover and also grow your savings. It keeps your family financially safe and also helps you plan for your future goals. With tax benefits, flexible fund switching(that comes with certain fees & charges), and market-linked growth, ULIPs offer many advantages.

Just remember, your money will grow only if you give it time. The 20-year period is ideal for those who want to stay patient and earn more. This is not a plan for quick returns, but for steady and safe financial planning. If you want a mix of protection and progress, you may prefer to buy a ULIP plan and let it grow with time.

FAQs

Is it a good time to buy a ULIP?

ULIPs can be a good option if you are planning for the long term and want both protection and growth. These plans give life cover and help your money grow through funds linked to the market. If you don’t need your money soon and are okay with market ups and downs, ULIPs may work well. They are not for people looking for quick money. Instead, they suit those who want to save slowly and steadily. It’s smart to choose ULIPs when your goal is long-term, like retirement or your child’s education.

Which is better, SIP or ULIP?

SIP helps you grow money through mutual funds, but it does not give any life insurance. ULIP gives you both market-linked growth and life cover. If you only want to grow your money, a SIP might be enough. But if you want growth along with financial protection for your family, ULIP can be a better option. The choice depends on your needs. ULIP works like a two-in-one plan. SIP is only for investing in capital market through Mutual funds. So, think about what matters more to you—only savings or savings plus insurance cover.

Are ULIP returns guaranteed after 20 years?

No, ULIP returns are not guaranteed. These returns depend on how the market performs over time. If you choose equity funds and the market grows, your ULIP returns may also grow. But if the market goes down, your returns can also be reduced. That’s why ULIPs work best when you stay invested for a long time. Over 20 years, the ups and downs balance out. You may not get fixed returns, but you get a chance to grow your money. ULIP gives a mix of insurance and growth, not a fixed amount.

What factors impact ULIP returns over 20 years?

Many things affect how much money you can get from a ULIP in 20 years. First is the market—if it does well, your funds grow. Second is the type of fund you choose—equity, debt, or mixed. Third is how much money you pay regularly. And last is how long you keep the plan. If you stay invested and review your plan once in a while, your chances of getting better returns increase. So, plan well, stay consistent, and pick funds that match your comfort level with risk.

What is the historical performance of ULIPs over 20 years?

Investments in ULIPs have been found to have respectable returns when held for a longer time, like 20 years, and a ULIP provides investment and insurance combined, and the returns will ultimately depend on the performance of the market. ULIPs, when invested in equity funds, will generally yield good returns, but they carry higher risk and will fluctuate more than debt funds. Debt funds will be safer as risk and volatility are lower, but will earn lower returns. The returns of ULIPs are inherently not guaranteed and will fluctuate because they are invested in the market.