ULIP Calculator- How to Calculate Returns on ULIP Plans

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For a very long time, ULIPs have consistently ranked alongside some of the most misunderstood and mis-sold investment products. In 2010, the Insurance Regulatory and Development Authority of India (IRDAI) took certain measures to better structure ULIP plans, lower down the charges associated with them and make them more customer-friendly. But ULIPs didn’t become popular until the reintroduction of the LTCG tax in the Union Budget 2018. In the aftermath of the subsequent shock waves it sent amongst investors, more and more life insurance companies started highlighting the tax benefits of the new-age ULIP plans.

ULIP Calculator- How to Calculate Returns on ULIP Plans

Unit-linked Insurance Plans (ULIPs) are the hybrid, insurance-investment products, where a part of the premium is paid for life insurance coverage and another part is invested in equity, debt or growth schemes depending upon the risk appetite of the investor. Upon maturity, the fund value, which reflects the increasing corpus by way of NAV is paid, while in the event of the death of the policyholder, the sum assured or the total fund value, whichever is higher, is paid to the nominee.

Here’s the deal: a lot of investors are often faced with the challenge as to how to calculate the premium payment for a ULIP plan. This is where ULIP calculators come to the rescue of investors. In case you’re wondering what is ULIP calculator, check out this quick definition.

ULIP Calculator: A ULIP calculator is a freely available, online tool that helps ULIP investors calculate the exact premium amount and returns they can generate. ULIP calculators calculate the returns offered by a particular ULIP plan based on the premium amount and the intended term of the plan. These online ULIP calculators help investors make a well-informed decision by comparing different ULIP plans and their corresponding returns.  

Most of these online ULIP calculators are available with a user-friendly and an easy-to-use interface in order to help investors simply the otherwise complex calculations. In order to use a ULIP calculator, some important details are required, such as the frequency of premium payment, amount of investment, type of funds and the expected rate of returns. An online ULIP calculator computes the investment returns based on these values.  

Here’s how to use a ULIP calculator:

How to use a ULIP Calculator?

It is easy to use online ULIP calculators and one can easily calculate the returns they are likely to make from ULIP investment by following a few simple steps. Here’s a step-by-step to calculating the rate of returns ULIP plans:

  1. First things first, find a free and trustworthy online ULIP calculator.
  2. Now enter the amount that you wish to invest in the ULIP plan.
  3. Select the frequency of premium payment.
  4. Select the term of the ULIP policy.
  5. Fill in the amount you’re looking to allocate towards the investment component of the ULIP plan. Make sure you deduct all applicable charges from the premium payment before arriving at the investment amount.
  6. Enter the lock-in period for your intended ULIP plan. Typically, ULIP plans come with a lock-in period of 5 years.
  7. Take your pick of the investment funds. Carefully choose from equity, debt or balanced funds depending upon your risk appetite and future financial goals.

Things to Remember When Using ULIP Calculators

  1. Premium Payment Frequency – This is the frequency of the premium payments made by the policyholder. Typically, policyholders may choose to make monthly, quarterly, bi-annually and annually.   
  2. Investment Amount – This is the total amount that an investor intends to invest in a ULIP plan. Here, it is important to remember that one part of the ULIP investment made by the investor goes towards the life insurance coverage and the other part goes towards the investment component of the ULIP plan.
  3. Invest Fund Type – ULIP plans allow investors to choose from 3 different investment fund categories. These categories are Equity Funds, Debt Funds and Balanced Funds. One must carefully opt for the type of investment fund depending upon their future wealth creation objectives and risk appetite.
  4. Rate of Return – This is the expected rate of return that an investor wants to make on their investment. Different ULIP plans and the choice of investment funds may impact the overall rate of return.
  5. Charges – It is important to get acquainted to various charges under a ULIP plan to ensure correct and accurate allocation of premium towards the investment component. Here’s a list of various charges under ULIP plans:


  • Discontinuation Charges – This charge is payable if the policyholder plans to exit the ULIP plan before completing the lock-in period of 5 years.


  • Mortality Charges – This charge is payable in lieu of the life insurance component of the ULIP plan. Mortality charges vary depending upon the lifestyle and age of the policyholder.
  • Surrender Charges – This charge is imposed in the event of the premature withdrawal of the investment units.
  • Fund Management Charges – This charge is levied for the management of the investment fund selected by the policyholder. ULIP provider takes into account the NAV (Net Asset Value) of the funds to compute the fund management charges. Typically, the fund management charges cannot exceed 1.35% of the total asset value.
  • NAV of ULIP – Net Asset Value or NAV of a ULIP plan is an investment fund’s asset value after deducting the liabilities per unit. NAV id calculated subtracting Asset’s gross value from the value of the liabilities divided by the outstanding units.  
  • Policy Administration Charges – This charge is levied towards the maintenance of the policy and involves expenses related to policy paperwork, cost of underwriting, agent’s commission, etc.
  • Premium Allocation Charges – This charge is levied against the allocation of premium towards the different components of the policy.
  • Fund Switching Charges – Almost all ULIP plans come packed with option of fund switching options to help policyholder switch between funds depending upon their requisites and risk appetite at different times. A certain number of fund switches are provided free of cost, after which policyholders are required to pay for fund switching.



Bottom Line

ULIP investments are an attractive option for long-term investors. However, it makes sense for any investor to calculate the returns that are likely to make before investing in a ULIP plan. Using an online ULIP calculator is easy and can help investors understand the amount of money they need to invest in order to realize their future financial objectives.



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