When it comes to investments, you must make well-informed choices and decisions, after properly exploring all the plausible investment avenues, ensuring optimum returns, according to your investment tenure. In this article, we will discuss all the important aspects of ULIP investment schemes and the effective utilisation of the ULIP calculator for beneficial output.
What is ULIP?
ULIP is the abbreviation of Unit Linked Insurance Plan. It is a combination of both investment and insurance. You can invest in several combinations of funds like debts, equities, or balanced funds, allowing life insurance coverage.
You can allocate your premium value into several funds based on your financial goals and risk appetite. Professional fund managers manage these funds, making effective investment strategies according to your investment objectives and current market conditions. This implies that ULIP returns depend on market fluctuations.
ULIPs allow tax benefits up to a certain extent. Premiums paid towards ULIP funds are eligible for tax benefits of up to a maximum of INR 1.5 lakhs in one year under Section 80C of the Income Tax Act. ULIP tax benefits also include tax exemption on the maturity amount under Section 10 (10D) for premium payments upto Rs 2.5 lakhs a year, provided the sum assured is at least ten times the annualised premium.
What is a ULIP calculator?
A ULIP calculator is an effective tool that aids in the transparent evaluation of the benefits and potential returns of ULIP investments. It is calculated after considering several essential factors, including policy tenure, premium value, etc. With the aid of the results provided by a ULIP calculator, you can make necessary adjustments, additions, and alterations to your financial portfolio to ensure higher and optimum returns according to the investment tenure and premium payable amount.
Need to use ULIP calculator.
You need to take the help of the ULIP calculator for the following reasons:
- Effective financial planning: This unique but easy-to-use tool helps you make informed decisions about ULIP investments.
- Setting financial goals: To ensure effective investment returns, you need to set your target right. This will help you determine how much you need to invest, in which fund, and for how long. The ULIP calculator helps you improve your financial goals effectively, ensuring satisfactory returns, especially in the long run.
- Compare: With the help of the ULIP calculator, you can easily compare several competent ULIP funds and choose which suits you the best.
- Risk assessment: The ULIP calculator helps you to make a proper risk assessment.
- Performance monitoring: The ULIP calculator makes it easy to monitor the overall performance of every individual ULIP fund in which you have invested.
- User-friendly: The ULIP calculator is a user-friendly tool that helps users easily understand and evaluate various investment options based on several investment scenarios.
Once you understand the need to use a ULIP calculator, you need to know its basic features before you can effectively use it.
Features of ULIP calculator:
Some of the most highlighting features of the ULIP calculator include:
- Financial planning tool: A ULIP calculator is a powerful tool that makes it simple to understand the funds necessary for several investment scenarios.
- Transparent: This calculator effectively reveals all the plausible investment options available at hand based on specific circumstances that fit your needs. This makes it easier for investors to assess potential returns from their planned investment portfolio.
- Easy comparison: The ULIP calculator is very flexible, user-friendly, and easily accessible. Depending on the investment value and tenure, you can easily alter the variables.
- Informed decision-making: The ULIP calculator makes it very easy to calculate the premium payable amount and potential return prospects. This helps them switch funds according to changing prospects without any hassle.
However, multiple charges are associated with ULIPs, which also need to be incorporated to use a ULIP calculator efficiently.
Probable ULIP charges:
While investing in ULIP funds, you need to be aware of the potential charges involved in ULIP investments:
- Mortality charges: If the policyholder dies during the specified policy tenure, ULIP offers a pre-fixed sum to the policyholder’s family members.
- Management charge: You are appointed a professional fund manager to manage your invested funds, which are invested in several types of funds. You need to bear the cost of fund management.
- Administration charges: Every ULIP investment requires a certain amount of paperwork to ensure proper record maintenance. You need to bear such administration costs.
- Withdrawal charge: ULIPs have a standard lock-in period of 5 years. If you withdraw your fund before that tenure, you will be charged withdrawal charges.
How to optimise ULIP returns?
You can optimise your ULIP returns by following these steps:
- Punctual premium payment: You have to ensure that you pay the necessary premium dues on time without fail.
- Non-withdrawal of funds: To avoid withdrawal charges, you must ensure that your funds are intact and untouched before the completion of the lock-in period.
- Use the power of compounding: The power of compounding works like magic in the case of ULIP investments. Utilise this compounding effect to maximise your returns.
- Avoid partial withdrawals: If you wish to maximise your ULIP returns, you must avoid partial withdrawals.
Thus, to plan your investments effectively, you need to optimise the returns of your ULIP, keeping in mind the costs and charges. This is where a ULIP calculator comes in handy, estimating the overall returns based on your asset allocation and risk appetite.
Conclusion
The ULIP calculator helps you understand the future of your ULIP investments and keep track of all your ULIP investments. This is critical as it allows you to make the necessary alterations on time to ensure maximum returns.
