Unit Linked Insurance Plans or ULIPs are an investment vehicle that offer dual advantages of an investment tool and an insurance policy. A portion of the premiums paid is allocated to provide life insurance protection to the policyholder, while the rest is invested in market instruments like equity, debt, bonds, etc.
Benefits of ULIP
ULIP policy offers the following benefits to investors:
- Twin purpose: As the ULIP policy serves both investment and insurance purposes, investors need not research and find two different schemes for them.
- Tax benefits: Premiums paid in the ULIP policy are eligible for deduction from total gross income under section 80C of the Income Tax Act, 1961. The maximum amount of deduction available is up to Rs. 1,50,000. As the premiums are paid over multiple years, tax benefits also accrue over multiple years. Thus, apart from returns, you can also save tax by including the ULIP policy in your portfolio.
- Disciplined Investing: ULIPs help you develop discipline in investing as the regular premiums urge you to allocate a portion of your income towards savings and investments. Systematic savings over a considerable period reap compounding benefits.
- Goal-based investing: You set the goals, the time frame within which to achieve the goal, and start investing. ULIP policy helps you save for your specific goals like retirement planning, children’s education, marriage, etc.
How can you measure ULIP performance?
You don’t need to learn complex formulas to calculate the returns that a ULIP policy offers. You can just use a ULIP calculator to measure ULIP performance. A ULIP calculator is an online tool to help people estimate the value of their investments and compare between various investment products.
How to use a ULIP calculator?
While every insurance company has its own customised ULIP calculator, it’s easy to use it as the functioning is same for each of them. Just insert the following information into a ULIP calculator:
- Amount: It’s the amount you wish to invest or the amount you need as the maturity value.
- Tenure: ULIP policies usually have varying tenures depending on the term of the policies. It may include the term for which you would be paying premiums and the term for which you won’t be paying premiums.
- Rate of return: Here, you need to enter the rate of returns that your ULIP policy is expected to offer. If there is an option to bifurcate between risk-free and market returns, you can enter both the returns offered by risk-free investments as well as returns offered by the market.
Benefits of ULIP calculator
- Accuracy: A ULIP calculator offers the most accurate results as it operates through machine learning and code. Therefore, if the data entered by you is precise and correct, you could trust the results provided by a ULIP plan calculator.
- Graphical presentation: It also shows results in a graphical manner that enables easy analysis and understanding of the results.
- Flexible: Enter various permutations and combinations of premiums, tenures, and rates of returns. With quick and accurate results, it can help you attain an understanding of various scenarios. With the calculator completely available at your disposal, you can enter whatever information you require and get accurate results.
- Goal planning: A ULIP calculator can help you develop a foolproof investment strategy to help you achieve your goals within the set time frame. As it facilitates comparison between various plans, you can estimate their performance and select the best plan as per your goals. These help in making informed decisions for policyholders.
Bottom line
ULIPs are most effective in meeting your insurance as well as investing needs together. With a ULIP calculator, devise your best investment strategy and start investing.