Unit Linked Insurance Plans (ULIPs) combine life insurance and investment. Understanding how to calculate returns on ULIP investments is crucial for policyholders looking to track their financial progress.
What Are Absolute Returns in ULIP?
Absolute returns represent the percentage increase or decrease in the value of an investment over a specific period, usually a year.
Calculating absolute returns in ULIPs helps track investment performance and make informed decisions. It provides a straightforward way to measure the gain or loss from a ULIP investment.
Formula for Calculating Absolute Returns
If you seek to calculate the absolute returns from your ULIPs manually, a simple and common way to do it is using the following formula:
Absolute Return= Current NAV-Initial NAVInitial NAV ×100
Here, NAV refers to Net Asset Value. The value of the ULIP investment at the time of calculation can be determined using a ULIP calculator.
Let’s look at an example of how to implement the formula. Suppose you have invested ₹1,00,000 in a ULIP and the current value is ₹1,20,000, the absolute return is calculated as follows:
Absolute Return= 1,20,000-1,00,0001,00,000 ×100
A ULIP calculator is a tool that can help you get estimates for returns from investments into this policy. Knowing these details about your policy can help you keep track of your investments and their growth.
However, these return estimates are not the same as absolute returns derived from the NAV. Thus, it would not be ideal to rely on ULIP calculator if you are looking to figure out your absolute returns, but they can prove helpful in drawing draw estimates for time-bound earnings.
Hence, to calculate absolute returns, you could use the formula or consult your insurance provider. Alternatively, you may also consult a financial expert to understand these calculations.
This also allows you to take more informed steps when it comes to fund switching and keeping your portfolio balanced.
Factors Affecting ULIP Returns
Returns from ULIPs are linked to fund performance, amongst other factors. Let’s look at what can affect your ULIP returns.
-
Market Performance
Since ULIPs invest in equity, debt, or a combination of funds, market performance plays a key role in determining the growth of your investment.
-
Charges
ULIPs come with certain charges such as fund management fees and premium allocation charges, which can impact the overall returns. It’s important to factor in these charges when calculating the actual returns.
While calculating returns is important, remember that ULIPs also offer the benefits of life insurance plans.
These plans provide financial security for your loved ones while allowing your investments to grow, making them a key component of a well-rounded financial portfolio.
Thus, when buying these plans, it is important to remember that they offer more than market-linked returns. Life insurance can be a key aspect of your financial planning, especially if you have any liabilities or responsibilities towards your loved ones.
Disclaimers:
Unit Linked Insurance Products are different from the traditional insurance products and are subject to risk factors.
The Premium paid in unit-linked life insurance policies are subject to investment risks associated with capital markets and NAVs of the units may go up or down, based on the performance of fund and factors influencing the capital market and the insured is responsible for his/her decisions.
Please know the associated risks and the applicable charges from your Insurance Agent or the Intermediary or policy document issued by the Insurance Company.
| BEWARE OF SPURIOUS/ FRAUD PHONE CALLS! |
| IRDAI is not involved in activities like selling insurance policies, announcing bonus or Investment of premiums. Public receiving such phone calls are requested to lodge a police complaint. |
