Unit Linked Insurance Plan (ULIP) Calculator
A Unit Linked Insurance Plan or ULIP is a combination of investment and life insurance. So, a portion of the premium paid goes towards life cover, with the remaining amount being invested in financial instruments.
Moreover, before investing in any insurance product, one must compare cost and returns. To ease this comparison and the overall investment process, a ULIP calculator can be a helpful tool.
Read through to find out all the vital aspects related to a ULIP calculator online.
What Is an Online ULIP Calculator?
An online free ULIP calculator is a handy tool that allows investors to determine their expected returns. For this calculation, it evaluates crucial data points like premium, age, tenure and rate of return.
That said, as ULIPs are subject to market risks, this tool will only help investors estimate probable returns.
Furthermore, before allocating funds, it is imperative to ensure that the chosen ULIP plan is suited to one’s needs, wherein a ULIP return calculator proves to be resourceful.
How to Calculate ULIP Returns?
There are two ways of measuring one’s ULIP returns. Illustrated below are both of these, along with the formulae:
1. Absolute Returns
Absolute returns of a ULIP investment refers to the increase in the value of its assets over a period. It can be negative, indicating depreciation, or positive, which signals an appreciation in the asset value.
If you are willing to calculate the absolute returns of a scheme, the only values you need are its initial NAV and current NAV.
Given below is the formula for calculating the same:
[(Current NAV – Initial NAV)/Initial NAV] × 100
The table given below will make the working of the above formula simple for you. In this example, consider the initial NAV to be ₹250, current ULIP NAV as ₹350. Hence, the absolute return will be 40% in a year.
| Parameter | Value |
|---|---|
| Initial NAV | ₹250 |
| Current ULIP NAV | ₹350 |
| Absolute returns | 40% |
2. Compounded Annual Growth Rate (CAGR)
Compounded annual growth rate is an indicator of an investment’s annual growth over a certain time period. There is a mathematical formula for calculating CAGR for ULIP, which uses a scheme’s end value, beginning value, and the number of years of investment.
This formula is as below:
{[(Current Value of NAV/Initial Value of NAV) ^ (1/Number of Years)] – 1} x 100
Going through the below-mentioned table will enable you to easily understand the working of the above formula. In this example, consider the initial ULIP NAV to be ₹25, and after five years the current ULIP NAV is ₹35. Hence, the CAGR in this case will be 6.96%.
| Parameter | Value |
|---|---|
| Initial NAV | ₹25 |
| Number of years | 5 |
| Current NAV | ₹35 |
| CAGR | 6.96% |
Why Should You Use a ULIP Return Calculator?
ULIP combines the security and safety of an insurance plan, along with the wealth generation of an investment plan. In fact, this duality of ULIP makes it a popular investment vehicle among risk-averse investors. However, given its range of variety, it can be challenging for prospective investors to choose a plan that suits them.
A ULIP plan return calculator comes into play at this point. It allows one to compute the premium amount and potential returns. As a result, this tool allows investors to gain foresight into a plan and make an informed investment decision. Most importantly, a ULIP plan calculator ensures that individuals can make an investment based on their financial goals and investment horizon.
Features and Benefits of ULIP Return Calculator
An online ULIP maturity amount calculator comes with several features, including the ones highlighted below:
User Friendly- A ULIP insurance calculator is an easy-to-use digital tool. An investor simply needs to input a few key details into this calculator. As soon as the information is entered, this tool offers a snapshot of ULIP returns.
Flexibility- A ULIP interest rate calculator allows individuals to ascertain the amount to allocate in ULIP. Moreover, investors can alter the variable as per their requirements, which then changes the output.
Transparency- Returns on an investment are subject to change as per market fluctuations. ULIP calculator offers transparency as it helps one determine a fund’s returns for a specific period.
Planning- With a ULIP fund return calculator, one can compare and analyse the estimated returns of different ULIP products in the market. In addition, estimating returns, coupled with a comparative cost-benefit analysis of plans using a ULIP calculator, can help one make better investment decisions.
A multi-faceted product, ULIP offers life insurance in addition to fulfilling one’s long-term financial objectives. Individuals planning to invest in this vehicle can use a ULIP calculator to ensure that they make an informed investment decision.
Frequently Asked Questions
How does a ULIP calculator help in offline investments?
You can invest in ULIP plans both online and offline. The offline plans are bought through physical branches or agents. Still, you can use a ULIP calculator to compare plans and determine an investment’s future value.
Are returns on ULIP taxable?
ULIP returns on maturity are not taxable in India according to section 10 (10D) of the Income Tax Act, 1961.