How to use a ULIP calculator?

What is a Unit Linked Insurance Plan?

A ULIP is a money growth plan that is an investment coupled with an insurance financial instrument. They have the dual benefit of providing an insurance cover as well as giving assured returns. The divided premiums go into insurance, and the other goes into equity. The tenure starts at 5 years and goes up to the entire life. They are quite similar to Systematic Investment Plans.

A Unit Linked Insurance Plan stands out from most other money growth plans because of the gains from it- even a debt fund- are all tax-free. They are more reliable as wealth creation instruments for the long term.

Some good Unit Linked Insurance Plans in the Indian market today are Aegon iMaximize, SBI Life wealth, PNB MetLife Smart Platinum and HDFC Life Click2Invest.

Benefits of ULIP

After discussing What is ULIP, here is a list of some of its benefits:

1. ULIPs are quite comprehensive in nature and provide flexible schemes. They can be tailored to fit the financial standing and goals of the investor. They can be altered based on what stage of life you are in.

2. Additional riders can be added to plan at extra costs.

3. Life cover can be chosen by the policyholder.

4. The premium amounts can be changed as per the convenience of the investors. The investor can choose between the 3 investment variants: aggressive, balanced, and conservative.

5. The ULIP maintains a degree of transparency and has illustrative brochures to demonstrate the same. ULIPs are required to reveal the contents of their portfolio every financial quarter.

6. The returns are exempted from taxes under section 80c of the income tax act- these are valid on premiums up to Rs. 1,00,000. The investments are also tax-free.

7. Investors are free to switch between various funds that are linked to the same plan thereby minimizing their risks as and when they please. This is quite important as no other plan provides this luxury.

8. The Insurance Regulatory and Development Authority has capped the annual charges for ULIPs at 2.25% for the first 10 years of holding of the ULIP.

9. A one-time investment can also be made in the ULIP.

Net Asset Value

The Net Asset Value or NAV of a fund is a summary of the fund’s performance and indicated future trends of the same. It is the net value of assets divided by all outstanding number of units. It is the parameter based on which the performance of the fund in the ULIP is deliberated. Prior to the calculation of the NAV, the valuation of all the assets owned by the investor is to be known.

The Net Asset Value changes based on market conditions. This requires fund managers to calculate the Net Asset Value on a daily basis.

How to use a ULIP calculator?

A ULIP calculator helps to let policyholders know about the maturity amount of their investments based on the future value of their investments and the projected returns. The calculator also helps to compare various different policies based on their projected long-term returns.

• Online Accessibility

ULIP calculators can be accessed online at any financial website.

• Account creation

The ULIP calculator requires you to create an account and log in to it. This involves the provision of basic details like name, date of birth, contact details.

• Premium amount

ULIP investment-related information like the premium amount and the money to be invested in the ULIP. This amount should be a reflection of the realistic capabilities of the investor.

• Premium Frequency

The premiums for the Unit Linked Insurance Plans are to be paid either monthly, quarterly, half-yearly or yearly. This can be chosen as per the convenience of the investor and the amount that they can pay.

• Tenure

After this, the tenure for the investment is to be decided. This is based on the long-term goals, objectives, and the investment horizon of the investors.

• Risk tolerance

Next, there is an option to choose an investment fund based on the investor's risk tolerance and the current market conditions.

• Calculation

Upon clicking the ‘calculate’ option, the projected details on the returns for the selected ULIP plan. Various ULIPs can be calculated in a similar fashion before the purchase of a particular plan.

Benefits of using a ULIP calculator:

• Online ULIP calculators provide transparency for the returns for a specific fund by calculating the tenure and the premiums by computing the amount the investors need to invest for the returns they expect over a long-term investment horizon.
 
• ULIP calculators are used as planning tools for investors. They can be efficient in decision making when it comes to picking between the various funds. Analysis of the returns of various ULIPs helps to make rational investment decisions.

• ULIP calculators are easy to use and comprehend. They are also free of cost for the investors to use.

• Investments can be planned and organized according to the financial goals and risk appetites of the investors using an effective ULIP calculator.

• A ULIP calculator offers complete control to the policyholder to make financial decisions well equipped with all the information necessary.

• Another benefit of the ULIP is that it takes into consideration the inflation rates as well. These calculations can get quite tedious for people to understand without the help of a financial advisor. The ULIP calculator mitigates any unnecessary confusions regarding the same.

• ULIP calculators can also be used by offline investors. The premiums, tenure and financial horizon can be fed into the online ULIP calculator to estimate the future value of all Unit linked investment plans.

Using of Unit Linked Investment Plan calculators online are quite convenient for investors and are hassle-free to use. They are also free of cost for all the information they provide.
Analyzing the various funds also helps investors make well-informed decisions for maximum returns on their investments.

A ULIP is an ideal way to protect the family as well as invest in their future. They have the returns of a mutual fund coupled with the security of life insurance.