ULIP Plans with the Highest Returns Over 25 Years

What is the 25-year ULIP Policy?

A 25-year ULIP policy means buying a life insurance plan with a policy term of 25 years . It is a two-in-one plan. One part of your premium goes towards life cover. The other part goes into market-linked funds. This plan can help you meet big life goals like your child’s education , retirement etc. It can also help your family financially if something happens to you during the policy.

Staying invested in the policy for the full 25 years can help maximize your returns. The longer you stay, the better the chances of earning more money. It is made for people who have long-term plans in mind and want both protection and savings.

How Does the Policy Work?

The functioning of a ULIP is simple. You can understand it through these points:

1. You pick the policy, and the premium is determined by the insurer based on your coverage choices..
2. This premium is split into two parts. One part gives you life cover. The other part is put in market linked funds.
3. You can pick from different types of market linked funds. There are equity funds (more risk, potential for high return), debt funds (less risk, stable return), or balanced funds (mix of both).
4. The money invested in market linked funds is subject to market volatility.
5. The per unit value of the funds assets is called NAV (Net Asset Value).
6. After the 5 year lock in period , you can take out some part of the money, subject to policy terms and conditions. This is called a partial withdrawal.
7. If you remain invested in the plan for 25 years, you can receive a maturity amount, which reflects your total fund value at the end of the term.
8. If something happens to you during the policy term, your nominee gets the sum assured or the fund value, whichever is higher.

Key Factors That Affect ULIP Returns in 25 Years

Here are some important things that can change your ULIP returns:

• Market conditions : Market volatility directly affect your fund value.
• Fund selection : Choosing equity , debt, hybrid funds can make a difference in the long run.
• Duration : The longer you stay, the better the chances of getting returns.
• ULIP charges : Fees like policy charges, fund management charges, and switching charges can reduce your returns.
• Switching strategy : You can switch funds depending on your risk appetite , market performance and your life goals.

Why Should You Choose Such a Plan?

A 25-year ULIP policy offers many benefits. Let’s understand why it may be a good choice for your future plans.

1. Market-Linked Growth : You get a chance to earn returns, based on how the market performs.
2. Life Cover : You get financial protection. If something happens to you, your family gets the death benefit .
3. Long-Term Wealth Creation : Staying invested for 25 years gives your money time to grow with the power of compounding.
4. Tax Benefits : You can save tax on the premium under Section 80C (only under the old tax regime) and on maturity benefits under Section 10(10D), subject to provisions of the Income Tax Act.
5. Flexibility : You can switch between equity, debt, and balanced funds.
6. Partial Withdrawals : After 5 years, you can withdraw some money if you need it for emergencies.

How are Return Rates Calculated on 25-Year ULIP Policy?

The returns on a 25-year ULIP policy are calculated using a few simple steps:

1. Fund Units and NAV : Each time you pay; you buy units in a fund. The price of each unit is called NAV (Net Asset Value). NAV changes daily.
   Formula: NAV = (Total assets - Total liabilities) / Number of units
2. Maturity Value : To find out how much you will get; multiply the number of units you hold by the NAV at the end of 25 years.
   Formula: Maturity value = Total units × Final NAV
3. CAGR (Compound Annual Growth Rate) : This shows your average yearly return over 25 years.
   Formula: CAGR = [(Final NAV / Initial NAV) ^ (1/25)] - 1

This helps you track how your ULIP is performing.

How Do You Maximise ULIP Returns in 25 Years?

Follow these tips to get the best out of your ULIP:

• Start early : Begin at a young age to enjoy long-term benefits.
• Stay invested : Don’t exit early. 25 years is suitable for growth.
• Switch wisely : Move between funds as per market trends.
• Check performance regularly : Keep an eye on fund growth and make changes if needed.

Conclusion

When you buy a ULIP for 25 years, it gives you several benefits. First, you promise your family a financially secure future. In case of your untimely demise, they do not have to face financial hardships to meet their basic needs. Additionally, with ULIPs, you grow your funds. Consequently, your family is secured in your absence. At the same time, you can have substantial funds that may help you have a smooth retirement.

FAQs

What is the average return on ULIP?

ULIP returns are not fixed. They can go up or down based on the market. But if you stay with the plan for a long time, like 25 years, you may get good results. Most people who stay that long can expect returns. This means your money can grow more over time. But remember, returns may be more or less depending on the fund you choose and how the market works.

Are ULIPs a good investment for the long term?

Yes, a ULIP is often better when you keep it for a long time, like 25 years. Market fluctuations tend to balance out when viewed over an extended period. This may help optimize your returns. You also get life cover to protect your family. So, with one plan, you can grow your money and also stay protected. ULIPs are made for people who want to plan ahead for big goals like retirement or education.

Is ULIP guaranteed returns?

No, ULIP returns are not guaranteed. This is because a part of the premium goes into market-linked funds. These funds are subject to market volatility. That is why returns can change. . It is important to read your policy documents and understand that ULIPs can give good returns, but they also come with risks.

Can ULIPs give higher returns?

Certainly, ULIPs can lead to higher returns depending on the type of fund selected and the market performance . For eg – If you invest in equity funds and leave the money invested for a sufficient time period which have higher growth potential during upward-moving markets, but at the same time, have higher risk during down markets. Hence, we can say higher risk can be associated with higher returns. If you have the time to endure years of potential market changes, ULIPs could help you accumulate funds for your future Make sure to regularly track the performance of your chosen fund(s).