Stock market investment is the preferred option for many when it comes to wealth accumulation in terms of having a financially secure future. However, investing in the stock market does not provide financial cover from life risks. There is one financial instrument, however, which provides you the dual benefit of investment and insurance. This instrument is known as ULIP. In recent years, people have started opting for ULIPs due to the steady returns and the life insurance cover it offers in the same policy. If you are looking to invest in ULIP but, want to get an idea about how much you should invest and what the returns would be, you can use the ULIP plan calculator offered by insurers. Read on to know about its usage and benefits.
What is ULIP?
A unit linked insurance plan is a type of life insurance policy that offers the benefit of investment and insurance in the same policy. The premium paid towards the policy is used for investment and insurance. You get to invest in equity and debt funds based on your risk appetite and life goals. The returns that you earn on your investment will help you in securing a safe future. In the event of your untimely demise, your family gets the death benefit to cover their financial expenses.
What is a ULIP calculator?
Life insurance companies offer a ULIP plan calculator on their website for potential customers to use. The calculator helps you in understanding things such as how much you should invest, the term of the policy and what your returns will be. Here are the steps of using the calculator:
1. Visit the insurer’s website
If you have a preferred insurer from whom you are planning to buy a ULIP policy, you can visit their website and access the calculator. As all life insurance companies have the calculator on their website, you can visit any insurer’s website and use their calculator.
2. Input all the details
The calculator asks for various details based on which calculations are done. Details include how much amount is required by in order to achieve your life goal. You can either use the slider to select the amount or enter it manually yourself. The amount you enter should match or at least come close to what is required by you to accomplish your life goal.
Next, enter the number of years you are willing to invest in the policy. This duration gives you an idea about the number of years you will be required to invest in order to gain the amount for your life goals. You can either select the years using a slider or enter the number manually.
Next, you will get the option of how you want to divide your investment. In a ULIP policy, you can invest in an equity and debt fund. Depending on your requirement, you can choose to invest in just a single fund, or both of them. Using the slider, you can divide the investments you make. This is especially beneficial if you are planning on investing in both funds.
Next, you can choose what your expected returns are from your investments. Based on which you are choosing to invest in, select the percentage for your expected rate of return from your investments.
Based on all these details, the calculator will give show you the amount you will be required to invest on an annual basis. It also shows that your investments will be divided in both the funds.
For example, if the amount you need for your life goals is Rs.1,00,000,00, enter the amount accordingly. If you are willing to invest for 20 years, enter the same. Next, select how you want to decide your investment. If you want your investment to be 60% equity and 40% debt, select accordingly. Select your expected rate of return. Adjust the slider for both equity and debt fund. Based on these details, the calculator will show you an amount of Rs.2, 5,728. This is the amount that you will need to invest annually. The amount used for investments will be divided accordingly and shown to you.
What are the benefits?
Although the calculator will not give you the actual final amount, it will give you an estimate based on your input. The calculator is free to use and does not require any personal contact information. You can use it as many times as you want and try different combinations. It also helps you in making an informed decision before making an investment.
If you are planning on investing in ULIP and want to know the amount required, do use the calculator. To know about other things related to the policy, such as ULIP performance and how to track it, you can get in touch with your insurer to know more.
