Consider adding a Unit Linked Life Insurance Plan (ULIP) to your portfolio as a solid insurance investment. It combines the advantages of investments for wealth growth and life insurance, two distinct financial products. With a ULIP plan, the policyholder pays a portion of the premium for the life insurance policy, and the remaining amount is invested in a fund of their choice to achieve their financial objectives.
A ULIP policy is prudent from a long-term standpoint since, in addition to the dual advantages, it also allows for tax savings. Further benefits of ULIPs include partial withdrawals. When you suddenly need a large sum of money, the partial withdrawal option is helpful. Yet, it’s critical to comprehend how ULIP partial withdrawals operate and how to choose them carefully when necessary.
Is ULIP Partial Withdrawal Permitted?
For scenarios emerging at various life stages and needs, such as your children’s college education, a serious sickness, the acquisition of a new home or piece of property, your children’s marriage, etc., ULIP plans permit partial withdrawal in ULIP.
In February 2020, the Insurance Regulatory and Development Authority of India (IRDAI), which oversees ULIPs, released a new set of regulations for life insurance providers. Prior to the adoption of these new criteria, the insurer would choose the maximum withdrawal amount and other technicalities. Nonetheless, these specifics are now standardised. #
The ULIP calculator is a simple and convenient tool that you can use to predict the return you might get at maturity by entering a few details.
When Can We Exit the ULIP?
The policyholder may now withdraw a portion of their ULIP assets three times once the lock-in period has ended. This indicates that for the course of the ULIP policy’s term, the partial withdrawal facility is accessible three times. It’s also crucial to remember that partial withdrawals can only be made by policyholders who are at least 18 years old.
What is the ULIP Lock-in Period?
Under a ULIP, partial withdrawals are only permitted after the policy’s lock-in term has passed. Your ULIP policy’s maturity period could be 20 or 30 years. However, all ULIP plans include a five-year lock-in period. The money invested in funds is relevant to this lock-in period. The lock-in period was created to increase the value of your fund. Usually, your fund value doesn’t start to increase until you’ve paid your ULIP policy’s initial few premiums. Also, a longer investment horizon is better for gains and mitigating market risks.
Can I withdraw my money before the lock-in period?
Throughout the five-year lock-in period, you are not permitted to make partial withdrawals. There is no avoiding it. You won’t be able to access your money until the lock-in term is through, even if you decide to surrender or stop your ULIP policy.
The risk protection will terminate when you resign from your ULIP plan, but you still have to wait to get your money. It is also crucial to remember that only those who have paid all the required premiums and have an active ULIP policy are eligible for the partial withdrawal opportunity.
What is the maximum amount for partial withdrawals?
You can withdraw a minimum of 1,000 or 2,000 rupees from your ULIP plan when taking a portion of your funds, depending on your policy. The maximum partial withdrawal in the ULIP amount is about 25% of the fund’s value at the time of withdrawal. This is contingent upon the fund still having at least one year’s worth of premium.
Say, for example, that a policyholder purchased ULIP insurance with a fund value of 3 lakh after the lock-in term of five years. The total assured is six lakhs, and the annual premium is fifty thousand rupees. In this instance, 25% of the fund value is 75,000. Because the money equal to one year’s premium (50,000) is still in the fund when you make a withdrawal of 75,000, you can only withdraw 75,000 in whole.
How does this affect the Sum Assured?
Both the fund value and the sum insured are reduced by the amount you take from your ULIP fund.
This decrease in the sum assured, nevertheless, only lasts for two years. The sum promised will automatically return to its original amount at the conclusion of the two years.
It’s critical to keep in mind that this automatic restoration of the sum assured will only occur if you refrain from making any further withdrawals throughout the two-year window.
You can use a ULIP calculator to estimate future returns and the value of a ULIP investment.
