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ULIP Calculator: The Power Of Compounding Explained

A ULIP plan is a kind of life insurance policy. ULIP refers to unit linked insurance plan. The ULIP is a plan which consists of an insurance policy as well as an investment plan together under a single plan. If a person is to take up a ULIP plan, they will be treated as the investor and also as the insurance policy holder at the same time. It is because the plan holder is subject to getting the benefits of a comprehensive insurance cover and return on investments, both. A unit linked insurance plan is a two – in – one plan as it  gives double the amount of benefits for the price of one.

Functioning of the ULIP

The plan holder will pay the premiums for the ULIP plan. Then, these premiums will be considered as the premium amounts for the insurance plan and the investor is asked to select a percentage of the entire premium to be invested into the investment funds. So, a percentage of the premiums will be invested into the fund markets and the remaining amount will be used as the premiums for the insurance cover. So, that is how the investor or the insurance policy bearer will be getting both a return on the investments and an insurance cover. The percentage of premiums is put into various investment funds in money markets, fund markets and fund companies in order to let the capital grow so that a return for the investor is accrued. After the investments have been made, the investor can check the status of their funds through the NAV – net asset value. They are able to view the details about where their money is being invested into and what kind of funds are their money being put into.

The investor has the power to choose any type of ulip that they want their money to be invested into. The investor should choose any of the kinds of funds after analyzing their risk appetite as well as their money requirements. The following are the types of ULIP funds:

  • Balanced Fund ULIP
  • Cash Fund ULIP
  • Equity Fund ULIP
  • Bond Fund ULIP

ULIP calculator

A ulip calculator gives tentative returns of the corpus that would build up for the investor on the investments that they make in accordance with the amount they can afford to invest and other considerations as well.

What is the ULIP calculator used for?

The ULIP calculator also helps the investor by letting them get an idea about how much of their investments will accumulate in the return on investments in an approximate value, of course. The unit linked insurance plan calculator has to consider all the details about your investment potential in order to process the details and only then will it help you to choose a fund by the ULIP plan which will help the investor the best and give the maximum amount of benefits to them and the most suitable one for their requirements.

The unit linked insurance calculator will help the plan holder or the investor to get an idea of the returns that they might get on their investments after the end of the tenure of the investment period. The investor, after using the unit linked insurance calculator, gets a better idea of what amount of corpus they want to be able to fulfil their requirements.

To be able to process the results, the unit linked insurance plan will ask for certain details that are required to be filled by the plan holder or the investor of the ULIP plan. The details that the ULIP plan will ask for are as following:

  • The number of years that the investor wants to go ahead with investing money into the ULIP plan.
  • The amount of the investment that the ulip policy holder is planning on investing into the ULIP investment fund.
  • The percentage of the post – tax yearly rate of the return that the plan bearer has earned on the investment plan.
  • The frequency by which the investor will be making the investments into the ulip.

What is compounding?

Compounding is investing the return on investments received so as to earn returns again. Suppose, a person gets a return on investment and they put the return into the investment plan again in hopes of getting a larger return. Compounding is done so that the wealth of the person can be increased over a period of time.

Power of compounding

One of the biggest advantages of compounding is that your money is not stuck in the investment fund for a long time and you can take it out whenever you wish to do so and then invest in it again so that the risks of investing into any investment fund for a long time is eliminated.  Basically, compounding is earning a return on the return! It is done and works in a way that you will be able to earn more returns if more time at the disposal is available. The more time you get on your side, the more amounts of returns you can get through the process of compounding.

Compounding is basically getting more returns by investing the returns again instead of just keeping the money invested in the unit linked insurance plan which would give you a lesser amount of money.

The ULIP calculator will give you the estimates of how much time you need to be invested into the fund to get a certain corpus amount and this will help you to compound your returns to get more returns.

Use the ULIP calculator to get a better idea on how to go about investing into the ULIP funds and get the best results.

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