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ULIP Calculator

After going through all the different types of ULIP plans and advantages, a policyholder may look for ways to calculate the premium amount required and the subsequent returns on investment. For this ULIP calculator is available, a specially designed tool to help the investor in better understanding the premium amount required to meet the financial goal setting. The calculator eventually helps in determining the final value of a plan investment in future. You need details such as:

  • Investment amount and frequency
  • Number of years to make the investment
  • Percentage post-tax yearly rate of return and more

Based on the information provided, a ULIP calculator determines the returns offered from a particular ULIP plan. Moreover, some calculators help policyholders in comparing varied ULIP plans giving them the idea of the returns provided from each plan. This makes it easy for the investor to select the ULIP plan based on his aspirations.

Why use a ULIP Calculator?

A ULIP plan is an incredible financial instrument to maximize your returns and also get life cover security. However, there are a plethora of options regarding ULIP plans available in the markets today. This makes the task of selecting the right ULIP plan suited to an investor’s requirement difficult. To help the investors out of this predicament, online ULIP calculators are of great help.

The online ULIP calculators use the information and compute the premium amount required to meet the financial goals (both long-term and short-term) set by the investor. Hence, ULIP calculator is an ideal tool to decipher which ULIP plan an investor should subscribe to.

How to use a ULIP calculator?

For using a ULIP calculator, an investor must keep the following information handy:

  • Frequency of the premium payment
  • Money to be invested
  • The financial goal (returns)

After filling in the details, the final expected returns on investment can be calculated using the calculator.

Salient Features of ULIP Calculator

ULIP calculator helps the policyholder to calculate the corpus, avail the tax benefits, along with different other features, that are:

  • Transparency

    One significant component of the ULIP calculator is the transparent process to compute the final expected value of returns from the investments. It ensures comprehensive and transparent details of the funds. There is nothing hidden from the policyholder when it comes to funds or the returns.

  • Flexibility

    A ULIP calculator is exceptionally flexible in terms of changing the variables regarding the tenure of the ULIP policy and the amount of money to be invested by the policyholder.

  • Complete Control

    The policyholder gets full control in using a ULIP calculator. The policyholders can determine the premium amount and return on investments using the calculator.

  • Meet the Goals

    The calculator compares different types of funds in the market and allows the policyholder to zero in on the specific fund that can help meet the financial goal.

  • Safe Investment

    For risk-averse investors, calculator analyses the different fund options and then select the low-risk investment fund available.

Core Benefits of a ULIP calculator

The online ULIP calculators have several benefits; some of these are as follows:

  • The online ULIP calculators on websites are free to use. They are simple and easy to work with
  • The ULIP calculators make the complicated calculations simple, thus helping a policyholder to figure out the expected financial returns based on premium, age, tenure, etc.
  • The online ULIP calculator is user friendly and determines the safe investment options present over a while. One needs to fill in the details correctly to understand the various options available
  • It helps to finalize the fund to invest the money based on the expectations of the policyholder

Step-by-Step Method to use ULIP Calculator

Step 1: An investor must first log in to the online ULIP calculator that is available free on websites.

Step 2: Once the investor is logged in, the amount of money to be invested in the ULIP should be entered. Based on the expected financial returns or the financial goals, an individual can invest from a minimum premium amount of ₹1500 per month.

Step 3: The next step is to select the premium payment frequency. Depending upon the economic viability, an investor can choose to pay on monthly, quarterly instalments or in lump-sum amount.

Step 4: After that, choose the tenure or time period of the selected policy.

Step 5: In this step, the policyholder should enter the amount out of the total premium payment that is to be allocated for the investment.

Step 6: In this step, the policyholder must select the 'Lock-In' period of investment. The minimum lock-in period for ULIP plans is five years. It is to be noted that for maximum returns on investments, a policyholder should have a long term time frame in mind.

Step 7: This step requires an investor to select the funds where the money is to be allocated. There are different options available, including equity, debt funds, etc. It is vital to firstly gauge the past performance of the fund before allocating money. An investor should look at the past performance of three years before zeroing on the fund.

Other Information: After filling of the critical information, further details such as name, gender, Date of birth, health details are to be furnished.

For simple annualized returns

To Calculate Simple Annualized Returns:

  • Add absolute returns to one
  • Raise the whole - to the Power of (365 divided by total no. of days of holding policy)
  • Subtract by one

Formula - {(1 + Absolute Rate of Return) ^ (365/number of days)} -1

If the absolute returns are 50% and holding the policy for 6 months, the simple annualized returns will be:

{(1+0.50) ^ (365/182)} – 1

= (1.50^2) – 1

= 2.25 – 1

= 1.25

Hence, the Simple Annualized Returns are = 125%.

For Compound Annual Growth Rate

CAGR means annual growth rate without considering the volatility in the returns over a while.

Formula:  {[(Ending value of NAV/Beginning value of NAV)^(12/Number of Months)] – 1 per lakh invested}*100

If invested Rs 2 lakhs in a ULIP scheme with NAV of Rs 20 and now, NAV is Rs 40 After 24 months:

[{(40-20)^(12/24)} – 2] × 100

= 24.72%

Hence, CAGR = 24.72%.

Written By: Paisawiki - Updated: 26 March 2021