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Here's What It Takes to Create Rs.3 Crores With Just 10 Years of ULIP Investment

Here's What It Takes to Create Rs.3 Crores With Just 10 Years of ULIP Investment

ULIP for saving

Rs. 1.6 Lakhs a month is what it takes to build a corpus of Rs.3 Crores in a time period of 10 years or so. That is possible with a conservative rate of return of 8% p.a. However, this estimate does not account for the taxes on the interest or maturity value. So, the income from this investment has to be completely tax-free.

Is there such a wealth creation plan, which lets you accumulate crores within a few years, that too tax-free? Fortunately, there is – Unit Linked Insurance Plans or ULIP investment plans can make this feat possible for you.

What is ULIP Plan?

ULIPs are life insurance plans with a fruitful investment structure and features to help you build wealth with confidence. ULIPs allow you to invest in a mix of equity and debt funds under the same plan. You can also use dynamic investment strategies to keep your portfolio risk minimum and take advantage of the market opportunities.

ULIPs also have a life insurance component. Thus, you have a life cover as well which will be available to your family in case of your early demise.

How to Invest in ULIP to Build a Corpus?

Contrary to the popular belief, investing in ULIP is not a difficult task. The simplest way to achieve this goal would be to assume a minimum rate of return on a 10-year investment (approx. 8% p.a.) and start saving (Rs. 1.6 lakhs a month).

However, before beginning, you should spend some time to understand how you can better utilise its features to your advantage. With the unique features in a ULIP investment plan, you may end up either investing less or accumulating more.

For example, ULIP plan from Canara HSBC OBC Life, Invest 4G, offers asset management strategies and wealth boosters for long term investors. Strategies like auto rebalancing and safety switch, allow you to benefit from equity market movements and guard your corpus as you approach closer to maturity.

Also, unless you want to fulfil your family’s financial safety goal with this same plan you would want to keep the life cover limited to the necessary amount. Remember, life cover defines how much you can invest every year tax-free.

Keeping ULIP Investment Plan Tax-Free

The maturity value from the ULIP investment will stay tax-free so far as your annual investment amount stays below 10% of the life cover. So, to invest Rs. 1.6 Lakhs a month you will need to apply for a life cover of approx. Rs. 2 crores.

Also, if you plan to increase your investment in the coming years, you can keep your life cover slightly more than 10 times of your annual investment. After all, that’s the minimum you can choose for the security of your loved ones.

Can You Invest Lesser Amount?

Of course, you can. You need to invest Rs. 1.6 lakh only because you want to achieve the Rs.3 Crore goal in 10 years. If you increase the tenure, here’s how your monthly investment will drop:

Investment Tenure (years) Monthly Investment Needed
10 164,000
15 87,000
20 51,000
25 32,000
30 20,000

You may notice that with just 5-year increase in your investment tenure you monthly investment needs drop by 50%. What you see in this table is the power of compounding taking effect.

You can also see that anyone starting at the age of 25 can start investing just Rs. 20,000 a month and achieve this goal.

Can You Improve the Return on Investment?

There’s a popular saying among planners of all discipline, ‘plan for the worst and hope for the best.’ This is especially applicable to things which are not in your control, such as rate of return on investment.

Increasing your rate of return assumption will reduce your monthly investment need on paper. But, in reality, it may backfire as your earliest investment may drop and will fail to add enough value in the later years of investment. Worse if the actual returns remain below your expectation, you will need to invest higher amounts later to achieve the goal in time.

Use Power of Compounding

You want to invest more in the beginning years so that more of your savings benefit from the power of compounding. You can see the simple example in the table above, as you get more compounding your regular investments reduce exponentially.

You can also reverse the example to see it in another way. Suppose you are 30 years old right now and you start investing Rs. 20,000 a month in the ULIP plan. Whereas, your friend will start at the age of 50.

By the time your friend starts investing, you will be sitting comfortably at approx. Rs. 1.2 Crores. Not to forget the fact that you will still invest Rs. 20,000 towards this goal, while your friend will need to invest a whopping Rs. 1.63 lakhs per month.

Principles for Achieving Large Financial Goals

Nothing wrong if you can invest huge sums of money towards a single goal. However, for the most part, the example may seem quite impractical, as you are more likely to have multiple goals at the same time.

So, whatever financial goal you wish to achieve, always stick to the few principles of wealth creation plans:

  • Start early even with a small amount
  • Avoid assuming huge returns on investment
  • Focus on managing risk on your investment. More people lose money due to panic selling than actual market events
  • Invest regularly and as much as possible in a consistent rhythm, for example, Rs. 5000 every month
  • Unless investment management is your full-time role, automate as much of the transaction as possible; i.e. use auto-debit for investment, automated portfolio management for asset allocation changes and account transfers for maturity value.

With these principles, you can be sure to hit any financial goal you set your eyes on to the best of your capacity. May the power of compounding be with you.

Speak to an insurance specialist now!


In order to understand ULIP NAV, you first need to understand how ULIPs work. In ULIPs, a portion of premium from different investors is accumulated to create one investment corpus. This money is invested in several different market instruments. So to divide the returns properly among all the investors, the fund manager divides the net asset value in to small units with a specific face value. NAV is the per market share value of a fund. To better understand the definition of NAV, take a look at the formula below -

Net Asset Value = [Assets-(Liabilities + Expenses)] / Outstanding Units

It's not risky to invest in ULIP if you chose a safer path. Risk factor in ULIPs depends on the investment option you choose. If you are not okay with sharp movements, then choosing a low risk investment is a better idea. For people with high risk appetite, it's good to choose equity funds while risk-averse investors can go for debt funds.

You can opt for settlement option if you want to take your fund value in periodic installments. With the settlement option, you can get your maturity amount in installment as per the frequency chosen by you over a maximum period of 5 years. You can choose complete withdrawal of fund value at any point of time. Although, you will not get any life cover during this period.

ULIPs are life insurance products that provide paths to invest. And just like other investment option, there's no guaranteed investment return in a ULIP. Although, if you like taking risks and want to earn more returns on your investment, then opt for equity funds.

At the time of maturity of ULIP policy, you will get the fund value on your prevailing NAV. Fund value is the number of units of policy multiplied by NAV (net asset value).

Value of the fund = Total units of policy x NAV (Net Asset Value)

Well, discontinuing your premium payment will disrupt your savings as well as financial goals. In such case, you can approach your insurance company and ask for the revival of discontinued policy within the stipulated timelines. Also, you will have to pay all the unpaid premiums.

ULIP plan is a combination of investment and insurance. Thus, one must hold this plan for a duration of at least 10 years so as to get investment benefits out of it. As an early exit will have its own consequences. ULIPs have a lock-in-period of 5 years. Thus, you may surrender your policy before the completion of 5 years, but you will be paid only after the end of 5 years.

Generally, minimum lock-in period for ULIP is 5 consecutive policy years. During this time period, if the policyholder discontinues or surrenders the policy, then he/she will not able to receive any payouts. Withdrawals are only allowed at the end of the lock-in period. In addition to this, if you surrender your policy before the lock-in period ends, then you will have to pay surrender charges as well. Also, it is advisable not to exit your plan after the completion of 5 years of lock-in period, because if you stay invested for a longer duration it will help you reap better benefits.

The amount that you pay towards the Unit Linked Insurance Policy is eligible for tax deduction as per Section 80C of the Income Tax Act, 1961. This means that the premium amount paid will be deducted under section 80C from your taxable income up to a maximum limit, which is currently ₹1.5 Lakhs. However, the aggregate amount of deductions under section 80C, section 80CCC and 80CCD (1) shall not, in any case, exceed ₹1.5 Lakhs. Also, upon the maturity of the policy, the payout amount you receive will be exempt from income tax, subject to the applicable provisions of Section 10(10D) of the Income Tax Act, 1961.

Here’re the following major benefits of buying ULIP

1. Tax Benefits – It helps you to reduce tax liabilities. This means you are liable to enjoy tax benefits on the premiums paid towards the policy as per Section 80C of the Income Tax Act.

2. Long-term growth– One of the major benefits of buying a ULIP plan is that it offers long-term benefits. ULIPs come with a lock-in period of 5 years which will keep you invested for a longer period.

3. Dual benefits – ULIPs not only offer life coverage but also come with a wide range of investment funds that will help you earn great returns. This includes balanced funds, debt funds or equity funds. You can invest in any of them depending on your need and risk appetite.

4. Flexibility – It gives you the flexibility to switch between funds basis your risk appetite. You could select multiple funds and different investment strategies.

5. Partial withdrawal option – It allows you to make partial withdrawal in case of any uncalled medical emergency or contingency after completion of lock-in period.

ULIP is a perfect investment option if you are looking for long term wealth creation. It could be buying your own house, a new car, going on a long vacation, or your child’s higher education or marriage, ULIP helps you to meet all your long-term financial goals. Moreover, it comes with a lock-in period of 5 years which keep you invested for a longer period and helps you earn better returns. The lock-in period is calculated from the date when the policy is issued.

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