How Much Wealth Can I Create From ULIP In 10 Years?

2025-05-02

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What is ULIP | Unit Linked Insurance Plan |

A Unit Linked Insurance Plan (ULIP) can help you fulfil a wide slew of long-term investment objectives, be it retirement planning, meeting the cost of your child’s education or wealth and asset creation. The minimum lock-in period of 5 years ensures investor’s discipline along with generating good, market-linked returns. The key highlight of best ULIP is that these provide you with life cover, while a portion of the premium paid is invested in debt, equity or balanced funds. So along with boosting your income and helping you in realising your long-term investment objectives, ULIPs provide financial security to your family, even if you are not around. The dual benefits of both market-linked returns and a life insurance policy have made it among the most popular investment instruments in the market.

Expected wealth generation from ULIPs in 10 years: According to industry experts, you must stay invested in these schemes for a long-term period– typically for 10 years or more. Over a long-term, ULIPs are expected to generate returns ranging from 10% to 12%. The returns from the best ULIP are better than other market instruments like, Equity Linked Savings Schemes (ELSS), fixed deposits and tax-saving funds. ULIPs also provide better returns as compared to government-backed investment instruments, like National Savings Certificate (NSC) and Public Provident Fund (PPF). Inflationary trends can also negatively impact your returns over long-term. The best ULIP, however, can beat inflation.

Key Takeaways:

ULIPs offer the dual benefits of wealth creation and life insurance, making them a comprehensive investment option for long-term financial goals such as retirement and education planning.
A 10-year ULIP policy can generate returns of 10-12% depending on market performance, investment choices, and fund management, often outperforming other tax-saving and fixed-income instruments.
ULIPs provide tax benefits under Sections 80C and 10(10D), allowing deductions on premium payments and tax-free maturity benefits if specific conditions are met.
Compared to mutual funds, ULIPs have a mandatory lock-in period but offer fund-switching flexibility, tax efficiency, and insurance coverage, making them a more structured investment vehicle.
Charges such as policy administration, fund management, and mortality fees can impact ULIP returns, emphasising the importance of evaluating costs before investing to maximise wealth growth.

What makes ULIPs the best investment instrument for wealth generation in 10 years?

The best ULIP are equipped with several key features that will allow you to create wealth over an investment horizon of 10 years or more. These include:

Tax Savings: The amount which you received on the maturity of Unit Linked Insurance plans is exempt from taxation under Section 10 D of the Income Tax Act, 1961. Along with this tax relief, you can also avail tax benefits on premium payments. As per section 80 C of the act, premium payment, up to a maximum of Rs 1.5 lakh in a given financial year, is exempt from taxation. Partial withdrawals made without surrendering the whole policy are also tax-free.
Fund switching option: Over a 10-year investment horizon, you can receive brisk returns by exercising the option of fund switching in ULIPs. Initially, you can choose to invest in debt, equity or balanced funds. You can then select to rebalance your portfolio in sync with the changes in your risk appetite and investment objectives through the option of fund switching. You can also choose to switch funds after considering the performance of ULIP funds. You can choose from a wide variety of fund switching options, like Systematic Transfer Option (STO), Return Protector Option (RTO), Auto Fund Rebalancing (AFR) and Safety Switch Option (SSO).
Triple benefits of investment, savings and a life insurance policy: You can receive brisk, market-linked returns from the best ULIP, while simultaneously providing for the future financial security of your family. As a life insurance policy, ULIPs can provide financial support to your family in the case of any unfortunate eventuality. What’s more, the minimum lock-in period of five years inculcates the habit of savings, which is vital for wealth creation.
Flexibility: You can choose from a wide range of ULIPs to suit your individual investment objectives. Alongside, you also have the flexibility to choose your policy term and premium payment term.

Charges on ULIPs: Depending upon your policy, various charges can be levied on ULIPs. These include administrative charges, fund management charges, switch charges, premium allocation charge, partial withdrawal charges and surrender charges. The charges on the best ULIP are, however, transparent.

Conclusion: Thus, you can fulfil your objective of wealth creation over an investment horizon of 10 years by investing in the best ULIP. You can select plan from Canara HSBC Life Insurance, which allows you to create wealth along with the benefit of providing life cover. The plan is equipped with key benefits, like return of mortality charges, loyalty additions and wealth boosters. You can also choose to receive maturity benefits through the settlement option in instalments or according to the frequency selected by you, over a maximum period of 5 years.

How Does a 10-Year ULIP Policy Work?

According to industry experts, you must stay invested in these schemes for a long-term period– typically for ten years or more. Over the long term, ULIP returns are expected to range from 10% to 12%. The average ULIP returns are better than those of other market instruments like Equity Linked Savings Schemes (ELSS), fixed deposits, and tax-saving funds. ULIPs also provide better returns than government-backed investment instruments, like the National Savings Certificate (NSC) and the Public Provident Fund (PPF). Inflationary trends can also negatively impact your ULIP returns over the long term. The best ULIP, however, can beat inflation.

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Factors That Influence ULIP Returns in 10 Years

Several factors play a crucial role in determining the returns from a Unit Linked Insurance Plan (ULIP) over a 10-year period:

ULIP Charges: Various charges are deducted from the premium, which can impact overall returns. These include policy administration charges, fund management charges, premium allocation charges, mortality charges, fund switching charges, and discontinuation charges. It's essential to be aware of these fees as they reduce the investable portion of your premium.
Market Trends: The performance of the chosen funds within a ULIP is directly linked to market conditions. Monitoring historical market performance can provide insights into potential future returns, although it's not a guaranteed predictor.
Investment Tenure: Staying invested for a longer duration, such as 10 years or more, allows the investment to potentially absorb short-term market volatility and benefit from compounding, leading to better returns.
Risk Appetite and Fund Portfolio: Your choice between equity, debt, or balanced funds should align with your risk tolerance. Equity funds may offer higher returns with increased risk, while debt funds are generally more stable with moderate returns.
Fund Switching Options: ULIPs offer the flexibility to switch between funds based on market performance and changing financial goals. Utilising this feature can help optimise returns over the policy term.
Premium Payment Discipline: Consistent and timely premium payments ensure that the policy remains active, allowing the investment to grow uninterrupted and avoid penalties or policy discontinuance.
Partial Withdrawals: While ULIPs allow partial withdrawals after the lock-in period, frequent withdrawals can diminish the compounding benefits and reduce the corpus over time.

ULIP Tax Benefits & Wealth Creation Potential

ULIPs offer significant tax benefits while helping investors build long-term wealth. These benefits are twofold, covering both tax savings and wealth accumulation through disciplined investing.

Tax-Free Maturity Benefits: Under Section 10(10D) of the Income Tax Act, the maturity amount received from a ULIP is tax-exempt if the premium paid does not exceed 10% of the sum assured after April 1, 2012, issued policies.
Tax Deduction on Premium Payments: Investors can claim deductions of up to ₹1.5 lakh per year under Section 80C, reducing taxable income.
Tax-Free Partial Withdrawals: After the lock-in period of five years, partial withdrawals from ULIPs are exempt from taxation, provided they meet certain conditions.
Wealth Accumulation Through Market-Linked Returns: The dual benefit of life insurance and investment ensures long-term capital appreciation through equity and debt fund options.
Compounding Effect: Staying invested for a longer period allows policyholders to maximise returns through the power of compounding.

ULIPs vs. Mutual Funds: Which One Offers Better Wealth Growth?

Both ULIPs and mutual funds serve as the best investment options for wealth creation, but they differ in terms of features, risk exposure, and benefits.

Risk and Returns: Mutual funds, particularly equity funds, tend to offer higher returns but come with greater market volatility. ULIPs, on the other hand, provide more stable returns with an added insurance component.
Investment Flexibility: Mutual funds allow complete flexibility in terms of fund selection and withdrawal, whereas ULIPs have a mandatory lock-in period of five years.
Tax Benefits: ULIPs provide tax exemptions under Sections 80C and 10(10D), whereas mutual fund investments may attract capital gains tax.
Fund Management: ULIPs offer the option to switch between debt and equity funds without tax implications, while mutual funds require selling and repurchasing, which may trigger tax liabilities.
Purpose: ULIPs are designed for long-term financial planning, offering a combination of wealth creation and life insurance, whereas mutual funds focus solely on investment growth.

Choosing between ULIPs and mutual funds depends on an investor’s risk tolerance, financial goals, and investment horizon. Those seeking a mix of insurance and investment may prefer ULIPs, while aggressive investors aiming for high returns may opt for mutual funds.

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What Makes ULIPs the Best Investment Instrument for Wealth Generation in 10 Years?

The best ULIPs are equipped with several key features that will allow you to create wealth over an investment horizon of 10 years or more. These include:

1. Tax Savings

The amount that you received on the maturity of Unit Linked Insurance plans is exempt from taxation under Section 10 D of the Income Tax Act, 1961. Along with this tax relief, you can also avail yourself of tax benefits on premium payments. As per section 80 C of the act, premium payment, up to a maximum of ₹1.5 lakh in a given financial year, is exempt from taxation. Partial withdrawals made without surrendering the whole policy are also tax-free.

2. Fund Switching Option

Over a 10-year investment horizon, you can receive brisk returns by exercising the option of fund switching in ULIPs. Initially, you can choose to invest in debt, equity, or balanced funds. You can then select to rebalance your portfolio in sync with the changes in your risk appetite and investment objectives through the option of fund switching. You can also choose to switch funds after considering the performance of ULIP funds. You can choose from a wide variety of fund-switching options, like Systematic Transfer Option (STO), Return Protector Option (RTO), Auto Fund Rebalancing (AFR), and Safety Switch Option (SSO).

3. Triple Benefits of Investment, Savings, and a Life Insurance Policy

You can receive brisk, market-linked returns from the best ULIP while simultaneously providing for the future financial security of your family. As a life insurance policy, ULIPs can provide financial support to your family in the case of any unfortunate eventuality. Moreover, the minimum lock-in period of five years inculcates the habit of savings, which is vital for wealth creation.

4. Flexibility

You can choose from a wide range of ULIPs to suit your investment objectives. You also have the flexibility to choose your policy term and premium payment term.

Did You Know?

ULIP maturity proceeds are tax-exempt under section 10(10D) if annual premiums are under 10% of the sum assured, applicable to policies taken before Feb 1, 2021.

Source: ET Money

How are 10-Year ULIP Policy Return Rates Calculated?

ULIP rates indicate the return you can expect on your investment based on the performance of your chosen funds. These ULIP returns in 10 years, depending on market conditions and fund selection, with the Net Asset Value (NAV) of the funds calculated daily. Various factors, such as market and economic conditions and fund management, influence the NAV.

Remember that your investment amount is impacted by the insurance company’s ULIP charges. Depending upon your policy, various charges can be levied on ULIPs. These include administrative charges, fund management charges, switch charges, premium allocation charges, partial withdrawal charges, and surrender charges. The charges on the best ULIP are, however, transparent.

Conclusion

Thus, you can fulfil your objective of wealth creation over an investment horizon of 10 years by investing in the best ULIP. It helps you secure your family’s future while building a corpus for your goals. Before investing, you must evaluate your risk appetite, investment goals, and financial situation. A 10-year investment horizon can help your funds grow and yield good average ULIP returns.

Glossary

Market-Linked Returns: Returns vary based on the performance of the underlying market investments.
Equity-Linked Savings Schemes (ELSS): Mutual funds that invest in equities and offer tax benefits under 80C of the Income Tax Act.
National Savings Certificate (NSC): A fixed-income investment scheme by the Indian government that offers tax-saving benefits u/s 80C.
Surrender Charges: Fees deducted from the policy's fund value when the policyholder terminates the policy before maturity.
Mortality Charges: Fees deducted periodically to cover the cost of the life insurance component in a policy.

FAQs

The average return of a ULIP depends on several factors, like the performance of the chosen funds and market conditions. The value return rate generally ranges between 10-12%.

To achieve a ₹1 crore target from mutual fund investments in 10 years (annual return of 12%), you should invest ₹44,640 each month throughout the tenure. You must adjust your monthly investment amount based on the expected rate of return and investment tenure to meet your financial goal.

ULIPs provide the potential for tax benefits, flexible withdrawals, and long-term growth but entail high costs, market risks, and lock-in periods. They are suitable for long-term financial objectives, leveraging market volatility for tax-free income, although short-term gains may vary. ULIPs also offer features like premium redirection and top-up options to enhance investment flexibility.

The return from a ULIP plan can vary widely based on market performance and fund selection, typically ranging between 10% to 12% per annum over the long term.

Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.