ULIP (Unit Linked Insurance Plan) Returns

ULIP returns depend on market trends and fund type. Compare 5, 10, 15-year returns, understand benefits, calculation tips, key factors, and tax advantages to choose the right plan.
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3 min
28-March-2025

Unit Linked Insurance Plans (ULIPs) are a popular investment option in India, combining the benefits of life insurance with investment opportunities in equity and debt markets. ULIPs are designed to offer policyholders the dual advantage of protection and wealth creation, making them an attractive choice for long-term financial planning. Understanding ULIP returns and how they can benefit you in the future is crucial for building a solid financial foundation. This article explores the concept of ULIPs, the factors that influence their returns, and provides tips to maximise and compare ULIP plan with high returns with other investment options.

What is ULIP?

A Unit Linked Insurance Plan (ULIP) is a financial product that integrates insurance and investment under a single plan. When you invest in a ULIP, a portion of your premium is allocated towards providing life insurance coverage, while the remaining amount is invested in a variety of funds such as equity, debt, or a mix of both, depending on your risk appetite and investment goals.

ULIPs offer the flexibility to switch between different fund options, allowing investors to manage their portfolio according to market conditions. The returns on ULIPs are linked to the performance of the underlying assets, and therefore, they can vary based on market fluctuations. Many investors prefer ULIP plans with high returns as they not only provide market-linked growth but also come with the added advantage of life cover. This unique combination of protection and investment makes ULIPs a versatile tool for long-term financial planning.

Grow your wealth while staying insured with ULIP! Enjoy market-linked returns, tax benefits, and life cover in one plan. Compare plans and premiums!

Factors that influence ULIP returns

Following are the factors that affect the ULIP returns:

  • Market performance: The returns on ULIPs are directly linked to the performance of the underlying funds. A strong market performance can lead to higher returns, while a downturn can affect the value of your investment.
  • Fund allocation: The proportion of your premium invested in equity, debt, or balanced funds influences your returns. Equity funds have the potential for higher returns but come with higher risk, while debt funds are more stable but offer moderate returns.
  • Fund management charges: ULIPs come with various charges, including fund management fees, mortality charges, and policy administration fees. Higher charges can reduce the overall returns.
  • Investment horizon: The duration for which you stay invested in a ULIP significantly impacts the returns. Longer investment horizons, such as 10 or 20 years, typically allow more time for the investment to grow and recover from market volatility.
  • Switching flexibility: The ability to switch between different funds allows you to take advantage of changing market conditions, potentially enhancing your returns.

ULIP returns explained in detail

When you invest in a ULIP (Unit Linked Insurance Plan), your money is partly directed towards life insurance and partly towards market-linked funds. The returns you receive depend on how the chosen funds perform over time. Let’s look at ULIP returns in detail:

  • Market-linked growth – ULIP returns are tied to equity, debt, or balanced funds. If markets perform well, your investment grows faster.

  • Flexibility to switch – ULIPs allow you to switch between equity and debt funds, helping you adjust your portfolio as per market conditions.

  • Compounding benefits – Staying invested long-term can amplify your gains through the power of compounding.

  • Life cover advantage – Along with returns, you also get insurance protection, making it a dual-benefit investment.

Things to consider when choosing ULIP plans with high returns

Not all ULIPs deliver the same results. If you want to maximise your wealth creation, here are key things to consider when selecting ULIP plans with high returns:

  • Investment horizon – ULIPs are ideal for long-term investors. The longer you stay, the higher the chances of enjoying better returns.

  • Fund options available – Look for plans offering diverse choices like equity, debt, and balanced funds. Equity funds usually give higher returns but come with higher risk.

  • Switching flexibility – Plans with unlimited or higher free switches help you adapt your investments to market conditions without extra charges.

  • Charges involved – Understand premium allocation charges, fund management fees, and policy administration costs. Lower charges often translate to higher long-term returns.

  • Performance track record – Compare past ULIP fund returns across different plans to see consistency in growth.

  • Tax benefits – Check Section 80C and Section 10(10D) benefits for maximising tax savings along with returns.

  • Risk appetite alignment – If you prefer safer investments, debt-oriented ULIPs are suitable. If you’re growth-focused, equity ULIPs may be better.

Choosing the right ULIP is all about aligning your goals, risk tolerance, and time horizon with the fund options available.

Key features of ULIP returns

ULIP returns are unique because they combine protection with market growth. Let’s see some features, especially if you’re exploring ULIP plans with high returns:

  • Market-driven growth – Returns depend on underlying equity or debt funds.

  • Dual benefit – Insurance plus investment in a single plan.

  • Long-term wealth creation – Staying invested beyond 10–15 years gives compounding benefits.

  • Fund switching – Adjust your portfolio as per risk and market conditions.

Key benefits of investing in ULIPs

Following are the key advantages of investing in ULIP plans with high returns:

  • Dual benefits: ULIPs offer life insurance coverage along with investment opportunities, providing financial protection and wealth creation under a single plan.

  • Flexibility: The ability to switch between equity, debt, and balanced funds allows you to adjust your portfolio according to changing market conditions and investment goals.

  • Tax benefits: Premiums paid towards ULIPs are eligible for tax deductions under Section 80C, and the maturity proceeds are non-taxable under Section 10(10D), subject to conditions.

  • Transparency: ULIPs provide regular updates on the performance of the underlying funds, ensuring transparency and helping you make informed investment decisions.

  • Long-term growth: With a long-term investment horizon, ULIPs have the potential to offer substantial returns, benefiting from market growth and compounding.

How does a ULIP plan work?

Understanding ULIP functioning makes it easier to plan your investment strategy:

  • Premium allocation – Your premium is split into life cover and fund investment.

  • Fund options – Choose from equity, debt, or balanced funds.

  • Flexibility – Switch between funds depending on market performance.

  • Returns – Your maturity value depends on fund performance and duration.

Let us understand ULIP with an example

Suppose you invest Rs. 1 lakh annually for 15 years in a ULIP. If you opt for an equity-oriented fund and markets average 10–12% growth, your maturity corpus may cross Rs. 30–35 lakh, plus you get life cover throughout the policy.

Final ULIP returns

The final returns depend on fund selection, investment horizon, and charges. Equity-oriented ULIPs may deliver 10–12% CAGR, while debt ULIPs may give 5–7%. Balanced ULIPs usually fall in between.

Comparison of ULIP returns

Here’s a ULIP returns comparison across different fund types:

Fund type

Expected returns (CAGR)

Risk level

Ideal for

Equity ULIP

10–12%

High

Growth-focused investors

Debt ULIP

5–7%

Low

Risk-averse investors

Balanced ULIP

7–9%

Moderate

Investors seeking stability with growth

 

Further insights into ULIP fund returns:

  • Equity ULIPs work well if you stay invested long-term (10+ years).

  • Debt ULIPs are stable but may not beat inflation if held for a short period.

  • Balanced ULIPs offer a mix, suitable for investors who want growth without taking extreme risks.

ULIP returns: what to expect over different time periods

The performance of ULIP returns largely depends on how long you stay invested. Since ULIPs are designed as long-term wealth-creation tools, the benefits of compounding and fund growth become more visible over time. Let’s explore what you can expect at different stages:

  • ULIP returns in 5 Years – In the first five years, ULIP returns may appear modest because policy charges are adjusted in the early years and market volatility can impact growth. Equity funds may fluctuate, while debt options remain more stable. ULIP returns in 5 years is mostly viewed as the foundation stage where your investment begins to take shape.

  • ULIP returns in 10 Years – By the tenth year, the effect of compounding becomes stronger, especially in equity-focused funds. Investors often start seeing meaningful wealth accumulation at this stage with ULIP returns in 10 years. Balanced funds also provide steady growth with lower risk, while debt funds continue to deliver reliable but moderate returns.

  • ULIP returns in 20 Years – A two-decade horizon usually results in significant wealth creation. Equity-oriented ULIPs have the potential to generate double-digit annualised returns if markets perform well. ULIP returns in 20 years makes them ideal for long-term goals such as retirement, buying a house, or securing a child’s education.

  • ULIP returns in 25 Years – When held for 25 years, ULIPs truly demonstrate their strength. The power of compounding, tax advantages, and life insurance protection combine to deliver a large maturity corpus. Investors benefit from both financial security and wealth creation, making ULIP returns in 25 years the most rewarding for ULIPs.

In short, the longer you stay invested, the greater your growth potential. Patience and consistency are key to maximising ULIP returns across time horizons.

Tips to maximise on ULIP returns

Read on to know how you can maximise on your ULIP returns:

  • Choose the right funds: Align your fund choices with your risk tolerance and investment goals. Opt for equity funds if you have a higher risk appetite and seek long-term growth, and debt funds if you prefer stability and moderate returns.
  • Stay invested for the long term: ULIPs are best suited for long-term investments. Staying invested for at least 10 to 20 years can help maximise returns by allowing time for market corrections and compounding growth.
  • Utilise fund switching: Take advantage of the fund switching option to adjust your portfolio based on market conditions. This flexibility can help you optimise returns by moving to safer funds during downturns and aggressive funds during bull markets.
  • Monitor performance regularly: Keep track of your ULIP’s performance and make adjustments as needed. Regular monitoring helps you stay informed about your investment and make timely decisions to maximise returns.
  • Minimise charges: Be aware of the various charges associated with ULIPs and choose plans with lower fees to ensure that more of your money is invested and working for you.

Tips to compare ULIP returns with other investment options

Here is how you can compare ULIP returns to make the most of it:

  • Assess historical performance: Look at the historical performance of ULIP funds compared to other investment options like mutual funds, fixed deposits, and PPF. This gives you an idea of how ULIPs have performed over different market cycles.
  • Evaluate risk and return: Compare the risk and return profile of ULIPs with other investments. ULIPs, especially equity-oriented ones, can offer higher returns but come with higher risk compared to fixed deposits and bonds.
  • Consider tax benefits: Compare the tax advantages of ULIPs with other investment options. ULIPs offer tax benefits under Section 80C and Section 10(10D) of the Income Tax Act, which can enhance overall returns.
  • Review charges and fees: Evaluate the charges associated with ULIPs and other investments. Higher charges can erode returns, so choose options with lower fees to maximise your investment gains.
  • Check flexibility and liquidity: Compare the flexibility in switching funds within ULIPs to the liquidity and flexibility offered by other investment products. ULIPs provide the benefit of fund switching without incurring additional charges, unlike mutual funds.

Compare ULIP plans, premiums & returns in one place. Get a quote now!

Comparing ULIP returns with other insurance-linked investments

A ULIP plan with high returns offers both insurance and investment benefits, making it a popular choice. However, it is essential to compare ULIP returns with other insurance-linked investments like endowment plans and traditional life insurance to make an informed decision.

ULIP vs. endowment plans

  • ULIPs offer market-linked returns, while endowment plans provide fixed returns.
  • A ULIP plan with high returns has the potential for better wealth creation.

ULIP vs. traditional life insurance

  • Traditional life insurance focuses on risk coverage, while ULIPs combine investment and insurance.
  • ULIPs offer flexibility in fund allocation for higher growth potential.

Different plans have different offerings—find one that gives you maximum coverage. Compare policies today!

How to calculate ULIP returns: A step-by-step guide

A ULIP plan with high returns provides investment growth along with life insurance coverage. Calculating ULIP returns helps policyholders assess their investment performance and make informed financialdecisions. You can simplify this process using a ULIP returns calculator, which provides quick estimates based on your premium, policy term, and fund type. Follow these steps to determine your ULIP returns:

Step 1: Check fund value

Find the current Net Asset Value (NAV) of your ULIP fund.

Step 2: Use the return formula

ULIP returns (%) = [(Current NAV – Initial NAV) / Initial NAV] × 100.

Step 3: Consider charges

Deduct policy charges to get the actual returns.

Step 4: Compare performance

Evaluate your ULIP plan with high returns against market benchmarks.

Know your premium and returns in seconds! Calculate now and find the most suitable ULIP for you! Get Quote!

Pro Tip

Create wealth and meet your financial goals with a ULIP investment plan, start investing from Rs. 3,000/month.

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Tips to optimise ULIP investments

Here is how you can enhance your ULIP investments:

  • Start early: Begin investing in ULIPs early to benefit from compounding growth and long-term market appreciation.
  • Diversify your portfolio: Spread your investments across different fund options to mitigate risk and enhance returns.
  • Review your policy regularly: Regularly assess your ULIP policy and make necessary adjustments based on changing financial goals and market conditions.
  • Stay disciplined: Maintain a disciplined investment approach and avoid making impulsive decisions based on short-term market movements.
  • Consult a financial advisor: Seek professional advice to choose the right ULIP plan and manage your investments effectively to maximise returns.

What are the tax benefits on ULIP returns?

Following are the tax benefits you get on the ULIP returns:

  • Premium deductions: Premiums paid towards ULIP policies are eligible for tax deductions under Section 80C of the Income Tax Act, up to a maximum of Rs. 1.5 lakh per annum.
  • Tax-free maturity proceeds: The maturity proceeds from ULIPs are non-taxable under Section 10(10D) if the annual premium does not exceed 10% of the sum assured for policies issued after April 1, 2012.
  • No capital gains tax: ULIP returns are exempt from capital gains tax, making them a tax-efficient investment option compared to mutual funds and other market-linked investments.
  • Tax-free partial withdrawals: Partial withdrawals from ULIPs are also non-taxable, provided certain conditions are met, offering liquidity without tax implications.

Conclusion

ULIPs are a powerful financial tool that combines the benefits of life insurance with investment opportunities, making them ideal for long-term financial planning. Understanding ULIP returns and the factors that influence them is crucial for making informed investment decisions. By choosing the right funds, staying invested for the long term, utilising fund switching options, and minimising charges, you can maximise ULIP returns and build a secure financial future.

Comparing ULIP returns with other investment options helps you evaluate their performance and suitability for your financial goals. The tax benefits associated with ULIPs further enhance their appeal, making them a tax-efficient investment choice. By following the tips provided, you can optimise your ULIP investments and enjoy the dual benefits of protection and wealth creation.

Investing in ULIPs requires a disciplined approach and regular monitoring to ensure that your investments are aligned with your financial objectives. With the right strategy, ULIPs can play a significant role in securing your financial future and achieving your long-term goals.

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Frequently asked questions

What are the expected returns from a ULIP after 10 years?

The returns on a ULIP plan with high returns after 10 years depend on market performance and fund selection. On average, equity-based ULIPs may offer 10-12% annual returns, while debt-based ULIPs provide 6-8%, subject to market conditions and fund management.

How much return can ULIP products generate?

ULIP returns vary based on fund type, investment duration, and market performance. Equity-oriented ULIPs generally yield higher returns, while debt-based funds offer stability. A ULIP plan with high returns can provide long-term wealth growth, averaging between 8-12% annually in favourable market conditions.

What is an average return you get on ULIP?
The average return on ULIPs can vary widely based on the type of funds chosen (equity, debt, or balanced) and market performance. Historically, equity-oriented ULIPs have delivered annual returns between 8-12%, while debt-oriented ULIPs have provided more stable returns around 5-7%.
Is investing in a ULIP for 5 years a good option?
Investing in a ULIP for 5 years may not be ideal, as ULIPs are designed for long-term investment horizons. To maximise returns and benefit from market fluctuations, it is advisable to stay invested for at least 10 to 20 years, allowing time for the investment to grow.
Are ULIP returns guaranteed?
ULIP returns are not guaranteed as they are linked to the performance of the underlying market funds. The returns depend on the chosen fund's performance, market conditions, and investment strategy. While some ULIPs offer minimum return guarantees, the majority are subject to market risks.
Is a ULIP plan better than a fixed deposit?

A ULIP offers market-linked growth along with life cover, whereas an FD provides fixed but limited returns. If you want long-term wealth creation with insurance benefits, ULIPs can be a better option than traditional FDs.

What exactly is a low-cost ULIP?

A low-cost ULIP is a plan with minimal charges such as fund management or policy administration fees. Since fewer deductions are applied, more of your premium is invested, leading to better returns over the long run.

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*T&C Apply - Bajaj Finance Limited (‘BFL’) is a registered corporate agent of third party insurance products of Bajaj Allianz Life Insurance Company Limited, HDFC Life Insurance Company Limited, Life Insurance Corporation of India (LIC), Bajaj Allianz General Insurance Company Limited, SBI General Insurance Company Limited, ACKO General Insurance Company Limited, HDFC ERGO General Insurance Company, TATA AIG General Insurance Company Limited, ICICI Lombard General Insurance Company Limited, New India Assurance Limited, Chola MS General Insurance Company Limited, Zurich Kotak General Insurance Company Limited, Star Health & Allied Insurance Company Limited, Care Health Insurance Company Limited, Niva Bupa Health Insurance Company Limited, Aditya Birla Health Insurance Company Limited and Manipal Cigna Health Insurance Company Limited under the IRDAI composite registration number CA0101. Please note that, BFL does not underwrite the risk or act as an insurer. Your purchase of an insurance product is purely on a voluntary basis after your exercise of an independent due diligence on the suitability, viability of any insurance product. Any decision to purchase insurance product is solely at your own risk and responsibility and BFL shall not be liable for any loss or damage that any person may suffer, whether directly or indirectly. For more details on risk factors, terms and conditions and exclusions please read the product sales brochure & policy wordings carefully before concluding a sale. Tax benefits applicable if any, will be as per the prevailing tax laws. Tax laws are subject to change. BFL does NOT provide Tax/Investment advisory services. Please consult your advisors before proceeding to purchase an insurance product. Visitors are hereby informed that their information submitted on the website may also be shared with insurers. BFL is also distributor of other third-party products from Assistance service providers such as CPP Assistance Services Private Limited, Bajaj Finserv Health Limited. etc. All product information such as premium, benefits, exclusions, value added services etc. are authentic and solely based on the information received from the respective Insurance company or the respective Assistance provider company.

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#Above illustration is for Bajaj Allianz Life Goal Assure IV is A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN: 116L204V01) considering Male aged 25 years | Standard Life | Policy term (PT) - 20 years | Premium Payment Term (PPT) - 20 years | Total premiums paid Rs. 7,20,000 | Monthly Premium Payment Mode | Sum Assured Rs. 3,60,000 | Incase of unfortunate death during the 8th policy year, death benefit payable at 4% and 8% will be Rs. 3,60,000. This illustration is considering investment in "Pure Stock Fund - ULIF02721/07/06PURESTKFUN116” through Investor Selectable Portfolio Strategy and Goods & Service Tax (GST) of 18%.

Assumed investment returns on 20th Policy Year

CAGR*

₹14,50,242 - 8%*

₹ 9,46,134 - 4%*

The assumed rate of returns indicated at 4% and 8% are illustrative and not guaranteed and do not indicate the upper or lower limits of returns under the policy.