ULIP Calculator

What is a ULIP?

A unit linked insurance plan (ULIP) combines life insurance with market-linked investment. Part of your premium pays for life cover and charges; the rest is invested in funds you choose, such as equity, debt or a mix.

The value of your fund rises and falls with the market, so ULIP returns are not guaranteed. If you die during the term, your family receives the higher of the life cover and the fund value, depending on the plan.

How does the ULIP calculator work?

• Each premium is reduced by any premium allocation charge, and the rest buys fund units.
• Every month, any policy admin charge is taken from the fund, the fund grows at your expected return, and the fund management charge is deducted.
• Premiums stop after the payment term, but the fund keeps growing until the policy term ends.
• The calculator also works out your return after charges, so you can see how much the charges reduce it.

For example, paying ₹1 lakh a year for 10 years into a 15-year ULIP, with a 1.35% fund management charge, could grow to about ₹19.79 L if the fund earns 8% a year, or about ₹13.14 L at 4%. At 8%, the charges cost about ₹3.19 L over the term, bringing your return down to about 6.6% a year.

ULIP charges you should know

Why ULIPs show returns at 4% and 8%

IRDAI requires every insurer to show ULIP benefits at two assumed returns, 4% and 8% a year, so you can compare plans fairly. These are not guaranteed, and actual returns can be higher or lower depending on the funds you choose and the market.

How are ULIPs taxed?

• Premiums can be claimed as a deduction under the old tax regime, within the overall ₹1.5 lakh limit for tax-saving investments.
• The maturity amount is usually tax-free if your total ULIP premiums are up to ₹2.5 lakh a year and the life cover is at least 10 times the yearly premium.
• If your premiums are above ₹2.5 lakh a year, the gains are taxed as capital gains, like equity mutual funds.
• The amount paid to your family on death is tax-free.

Tax rules change, and section numbers changed under the Income-tax Act, 2025, so check the current rules before you invest.

Lock-in, switching and partial withdrawals

• ULIPs have a lock-in of 5 years. If you stop paying earlier, your fund moves to a discontinued policy fund and is paid out after the lock-in ends.
• Most plans let you switch between equity and debt funds a few times a year at no cost.
• After the lock-in, you can usually make partial withdrawals, within limits set by the plan.

ULIP or term insurance and mutual funds?

Some people prefer to buy a term plan for life cover and invest the rest in mutual funds. This keeps insurance and investment separate and can give higher cover for the same money. A ULIP suits people who want both in one plan, the discipline of regular premiums and tax-free maturity within the limits. Compare the total cost and your life cover before deciding.

Frequently asked questions