If you’ve ever been pitched a Unit Linked Insurance Plan (ULIP) and heard words like “market-linked returns” and “dual benefit (insurance + investment)”, you’re in good company. Many young salaried Indians ask: “But what kind of returns can I actually expect from ULIPs?”
So here’s the deal: We’re going to unpack ULIP returns, the historical performance, the factors that shape them, the hidden cost-drag, and how realistic your expectations should be in 2025. No agent jargon, no sugar-coating. Just real talk for someone who wants to make money work, not let it slip away.
By the end of this article, you’ll have a better handle on:
- What historical ULIP fund returns have been like over 5, 10, 15, 20, even 30 years.
- Which fund allocation types (equity, debt, hybrid) within ULIPs matter most.
- What charges, switch-options, market cycles and lock-in do to your net returns.
- How to set realistic expectations and compare ULIP returns against simpler alternatives.
So pour your chai, settle in, and let’s demystify ULIP returns for your financial journey. (And yes, we’ll link you to deeper guides on goal-based investing and insurance on our site too.)
What do we mean by “ULIP returns” & why historical data matters
When someone says “ULIP returns”, they usually mean the growth rate of the investment component of the ULIP (after charges) across a given time horizon. It might be expressed as absolute return or compound annual growth rate (CAGR). For example, according to one insurer, a 10-year ULIP might yield ~10-12% annually. Tata AIA
But a big nuance here: ULIPs are not fixed-return products. They are market-linked, which means performance depends on fund-choice (equity, debt, hybrid), the market cycle, and the cost structure inside the plan. In simpler words: ULIP returns = (Your premium minus charges) invested * market returns * your time-horizon. Do that math and you’ll see why “historical performance” becomes important.
Why look at historical performance? Because:
- It gives you a sense of how ULIPs have performed across market ups and downs.
- It helps you judge if a ULIP is likely to meet your goal (say retirement or child’s education) based on past rather than promotional numbers.
- It shows you the impact of costs, as early years in many ULIPs are “cost-heavy” and drag returns.
- It gives you a realistic frame: if ULIPs historically delivered ~10%-12%, you won’t expect 30% and be disappointed. For example, one article states that over 25 years, ULIP returns have averaged around 10-12% annually. HDFC Life
So yes, historical data won’t guarantee future results, but it sure helps you set the right expectations and avoid being mis-sold.
The snag: what historical performance actually shows
Let’s dive into real numbers and what they reveal about ULIP returns across different horizons.
5-Year and short-term results
If you’re looking at a ULIP with a 5-year horizon, data says: returns can be modest, and cost drag is significant. For instance, one source shows that in the 5-year category, performance may hover around 9-10% for certain funds. Moneycontrol+1 Historically, ULIP plans have offered average annual returns of around 11-20%.
But here’s the thing: that 11-20% range is broad and depends on fund type and cost. For short horizons, the cost-drag (premium allocation charges, mortality charges, etc.) is higher proportionally, so you may end up with lower net returns.
Key takeaway: If your investment horizon is under 7 years, expecting high ULIP returns is risky. Short-term ULIPs often underperform simpler investment routes due to cost drag and timing risk.
10-Year performance
10 years is where the benefits of ULIPs start to show more clearly. Many insurers suggest 10-year returns in the 12-20% annualised range (particularly for equity-oriented ULIPs). For example:
“Over 10 years, ULIPs have historically shown… aiming for the 12% to 20% range with equity-focused choices.” Kotak Life
But again, those are gross numbers, before considering your individual fund choice, cost structure, and whether you switched funds at the right time.
Here’s an example: The UTI Unit Linked Insurance plan shows for 10 years an annualised return of ~8.32% (NAV data) in one sample. Moneycontrol
That tells us: yes, some plans deliver higher, some lower, and you must dig into fund-level returns.
Key takeaway: For a 10-year horizon, ULIPs can be competitive, but don’t assume top bracket returns without looking at cost, fund type, and past fund-performance.
15, 20, 25+ year data
When your horizon is 15-20 years or more, ULIP returns tend to stabilise and the effect of charges diminishes relative to the total period. Some facts:
- On 20-year ULIPs: “ULIP returns in 20 years are impacted by various factors… historically given higher returns for equity-focused ULIPs.” IndiaFirst Life Insurance
- On a 25-year horizon: “Historical data for long-term equity investments demonstrates an average return of 10 to 12%.” HDFC Life
- On 30-year horizon: returns have “a wide range… from negative returns to returns of over 20% per annum.”
This really means: The longer you stay invested, the more the “wearing off” of initial charges, the more opportunity to ride through market cycles, the better chance your ULIP can deliver meaningful returns. But even then, “over 20% p.a.” is outlier territory, not typical.
Key takeaway: ULIPs for long-term goals (15–30 years) can deliver strong wealth accumulation, but only if you remain invested, pick the right fund structure, and manage costs/behaviour well.
Why ULIP returns vary so much: key influencing factors
Understanding past ULIP returns isn’t enough; you must know why they diverge. Let’s walk through the factors you must keep in mind when analysing ULIP performance.
Fund selection (equity vs debt vs hybrid)
ULIP returns depend heavily on whether your investment portion is in an equity fund, debt fund or hybrid/mixed fund. Equity funds have higher risk and higher reward potential, but also higher volatility. Debt funds are safer but return lower. Example: For a 10-year projection, one insurer shows 12% for equity, 7% for debt, 9% for balanced. IndiaFirst Life Insurance
So if you pick a ULIP but select a debt fund (because you are conservative), your returns may be much lower than the “12-20%” headline. And if you picked equity but switched to debt only when market dips or you panic, you may lose out on compounding.
Premium amount and payment horizon
The amount you pay (premium) and how long you stay invested matter. A younger investor paying regular premiums for 20 years leverages more compounding than someone paying large premium but for 5 years. Also, ULIP charges are heavier in early years, so short premium periods hurt returns.
Charges, loads and cost structure
One of the biggest silent killers of ULIP returns is cost. Premium allocation charges, mortality charges, fund-management fees, administration charges, switch charges, all reduce the net invested amount and hence reduce compounding benefit. Several sources emphasise this cost impact.
When evaluating historical performance, you must check if the return figure is “net of all charges” or “gross”. Many publicised numbers are pre-charges.
Market timing & switching behaviour
Because ULIPs are market-linked, when you buy, when you switch funds, when markets are doing well or poorly, everything affects returns. Many investors take “free switches” into equity when market is high, then switch to debt when market dips, thereby hurting returns rather than smoothing them. One article advises reviewing fund switching and staying invested.
Lock-in and staying period
The 5-year mandatory lock-in ensures you can’t exit quickly. That’s good. But many investors treat 5 years as “exit time” when actually for meaningful ULIP returns you may need 10-20 years. Early exits or shorter durations often lead to lower returns due to high initial costs and market cycle risk.
Taxation and regulatory changes
Past historical return data may not factor in regulatory changes or tax treatments that apply now. For example, maturity benefits tax-free under Section 10(10D) but only if conditions are met (premium limits, sum assured limits) and that affects effective returns. Newer rules may reduce net benefit and thus effective return.
Inflation and real returns
Another subtle point: even if you achieve say 10% annualised return, inflation in India may be 5–6%. So your real return (return after inflation) might be 4–5%. Historical data often shows nominal return, so when comparing ULIP returns, remember you’re truly growing wealth only if you beat inflation and charges combined.
How to interpret historical ULIP returns: realistic expectations for 2025
If you’re a young salaried person (age 22–28) and thinking of using a ULIP to build wealth, here’s how you should interpret past numbers and set expectations:
- Be conservative: If long-term average historical ULIP returns (equity-oriented) hover around 10-12% (per 25 years data) and 12-15% (per 10 years data), then using “20%+” in your expectation is risky.
- Ask “net of cost”: Ask the insurer to show your ULIP fund’s past performance net of all charges (premium loads, fund value, mortality, etc.).
- Match to your horizon: If you have 10+ years horizon, ULIP might give sufficient returns (assuming fund and cost align). If your horizon is <10 years, you may choose alternative investment vehicles.
- Compare alternatives: For example, a SIP in a low-cost index mutual fund plus term insurance may give you higher effective returns and greater flexibility with lower cost. Use historical data to compare: ULIP vs SIP vs ELSS.
- Use historical returns as reference, not guarantee: Past performance doesn’t guarantee future returns, markets change, cost structures vary, your behaviour may differ.
- Look at real returns: Subtract inflation (say 5%–6%) from nominal historical returns to see real wealth growth. If a 12% nominal return becomes 6% real, then evaluate if that meets your goal.
Here’s a mini-table summarising ball-park figures drawn from historical data:
| Investment horizon | Historical annualised returns (equity-oriented ULIPs) | Key caveats |
| 5 years | ~8-11% (some plans show ~10%) Moneycontrol+1 | Early cost drag is high, market cycle matters |
| 10 years | ~12-15% typical, some reports 12-20% range Kotak Life+1 | Fund and cost selection key |
| 20 years | ~10-12% average in many reports HDFC Life | Longer horizon smoothens cycles |
| 30 years | Very wide range: negative to >20% p.a. possible | Historical outlier performance; higher risk |
Case study: Translating historical ULIP returns into real-life example
Let’s bring this into your world, imagine you (age 25, salary ₹7 lakh/yr) buy a ULIP today, premium ₹1.5 lakh per year for 15 years, fund choice equity-oriented. Based on historical data, let’s estimate using a 12% annualised return (net of cost). (Disclaimer: this is hypothetical example, not guarantee.)
- Premium each year: ₹1.50 lakh
- Investment period: 15 years
- Expected annualised return: 12%
- Future value after 15 years ≈ ₹1.50 lakh × [((1 + 0.12)^15 – 1)/0.12] ≈ ₹58 lakh (approx)
Now if you’d chosen a more conservative estimate of 9% (maybe fund mix was hybrid), you’d get ≈ ₹42 lakh.
Under both cases you get decent corpus, but you must reflect: are you comfortable with 15-years lock-in, market risk, and cost structure? And compare: a SIP of ₹1.5 lakh/yr for 15 years in a low-cost index mutual fund with 12% annualised might give you a similar or higher corpus with no life-cover component and better flexibility.
What this shows: Historical ULIP returns help you build scenarios, but your actual result may differ based on fund, cost, your behavior (switching), and market. Use these examples to set realistic expectations, not chase the highest possible returns.
Should you rely on historical ULIP returns when deciding?
Yes, and no. At Paisaseekho, we believe you should use historical performance as one input, but you must not rely solely on it. Here’s how to do it smartly:
✅ Use historical ULIP returns to:
- Benchmark what a reasonable return might be (eg. 10–12%)
- Compare ULIP returns vs other investment vehicles (SIP, mutual funds, PPF)
- Understand how fund-choice, charges and horizon have impacted returns in the past
- Avoid unrealistic expectations and mis-selling
❌ Avoid using historical ULIP returns to:
- Assume “if I pick this ULIP I’ll get 17% every year”
- Ignore cost structure or fund-type just because old data looks good
- Use past highest returns without factoring in how market cycles and behaviour changed
- Ignore changes in regulation, taxation and product design (which may reduce future returns)
In short: historical ULIP returns are valuable, but they’re not guarantees. Your focus should be on aligning product + fund choice + horizon + costs + behaviour.
Practical checklist before trusting a ULIP on historical return claims
When an agent or a website shows you “ULIP returns – last 10 years 14% p.a.”, ask these questions (and do them yourself):
- What is the net annualised return after all charges?
- What was the fund-side performance over the last 5/10/15 years in that ULIP?
- Which fund type was used (equity, debt, hybrid)?
- What was the premium-allocation and cost structure for early years?
- What horizon was the figure calculated for? (10 years? 15 years?)
- What assumptions were used in the illustration (switching, top-ups, partial withdrawals)?
- Is the product lock-in of 5 years enough to see the claimed return horizon?
- What happens if you stay 20+ years, what did historical returns show?
- How does the return compare with a simpler alternative (like a SIP in a mutual fund)?
- How much does inflation eat into your real return?
This checklist ensures you’re using historical ULIP returns not just as bait, but as a measured input in your decision.
Also, if you’re building your investment plan, you might want to refer to our guide on long-term investment strategies to weigh ULIPs against other routes.
Conclusion
To wrap up: here’s what I want you to carry away.
- Historical data shows that ULIP returns can be decent, especially for longer horizons (10-20 years) with the right fund mix and low costs.
- But many young investors mis-interpret the numbers, expect unrealistic returns or ignore the cost drag, fund-type risk, switching behaviour and lock-in.
- If your horizon is short (<10 years), ULIP returns historically may under-deliver compared to simpler low-cost investments.
- Always ask for net returns, not just advertised numbers.
- Use past performance as one input, but align your product choice with your goal, your time-horizon, your risk profile.
- Remember: even a 10-12% return has to survive inflation, costs and your behaviour. The real value is in how much you control those variables.
You’re building the future you want, for yourself, for your family. And knowing how ULIPs have historically behaved helps you avoid being sold a dream and instead invest with clarity. You’ve got this. At Paisaseekho, we’re right here helping you decode the money side of life.
FAQs
Q1. What has been the average ULIP returns in India over the last 10 years?
Answer: According to insurer/sources, equity-oriented ULIPs in India over a 10-year horizon have historically shown annualised returns in the range of 12%-20%, depending on fund choice, cost and switching behaviour. However, real-life returns (net of charges and behavioural factors) may be lower, some funds show ~8% in specific cases. Moneycontrol The key is to check which specific ULIP fund you are investing in, its cost structure, and whether the time-horizon aligns.
Q2. Can past ULIP returns be considered reliable for future predictions?
Answer: No. While historical performance helps you frame realistic expectations (for example, that 10-12% p.a. is more typical than 20%+), it cannot guarantee future results. ULIPs are market-linked; returns depend on market cycles, fund management, your behaviour, and changing regulatory/tax conditions. Several sources caution that “past performance is not indicative of future performance”. HDFC Life You should use past returns as a benchmark, not a promise.
Q3. How do charges and fund-type affect my ULIP return potential?
Answer: They matter a lot. In the early years of a ULIP, a significant portion of your premium goes to allocation charges, administrative and mortality charges. These reduce the net investible amount, thereby dragging returns. Reports highlight that ignoring cost structure is one of the major mistakes when calculating ULIP returns.Similarly, if you pick a debt-fund option inside ULIP, your return potential will be lower (for example ~7% p.a. in one projection) compared to equity fund (~12% p.a.). IndiaFirst Life Insurance So, fund choice + understanding charges = big part of your real return.
Q4. What kind of time horizon is ideal for getting good ULIP returns?
Answer: Generally, longer is better. Data suggests that horizons of 10 years or more give ULIP investments a better chance of delivering meaningful returns, because costs are spread, and market cycles get averaged out. For example, many sources show 15-20 year ULIPs giving ~10-12% p.a. on average. HDFC Life+1 On the other hand, if your horizon is less than, say, 5–7 years, ULIPs may under-perform simpler investment routes because initial cost drag and short-term market risk remain high.
Q5. If I already hold a ULIP, how should I use historical returns to assess it now?
Answer: Good question. If you already hold a ULIP, you can do this:
- Check what fund you’re in (equity/debt/hybrid) and what its historical annualised return has been in your ULIP company.
- Compare that to benchmark alternatives (e.g., large-cap mutual funds or index funds).
- Calculate the net invested portion (premium minus all charges) and then compute your actual CAGR over years you’ve been invested.
- See how your current fund value projection looks if you continued for another 10+ years, using realistic historical return assumptions (eg. 10% p.a.)
- Ask: if I switch funds (within ULIP) or change to a different investment altogether, will my long-term expected corpus improve?
- Use the historical performance data only as a reference point, not a guarantee, and decide whether to stay the course or make change.
Disclaimer
This article is for educational purposes only. It does not constitute financial advice, recommendation or endorsement of any specific ULIP plan or investment strategy. Past performance of a product or fund is not indicative of future results. Always evaluate your personal financial goals, risk appetite, time horizon and read all policy documents carefully before making a decision. You may also consult a qualified financial advisor before purchasing any ULIP or other investment-insurance product.
