A ULIP or Unit Linked Insurance Plan is a comprehensive life insurance plan which acts as the best medium to pool funds in an insurance policy. Not only does it provide protection similar to a life insurance cover, but it also gives a platform for calculative investment activity.
Since a part of the premium paid depends upon market trend and stability, people often come across questions like Can they withdraw money from ULIP? Or If a partial withdrawal is allowed in ULIP etc. The given content addresses these questions and explores knowledge around the facility of partial withdrawal from ULIP.
What is a Partial withdrawal?
ULIP plans or Unit Linked Insurance Plans are also well renowned for their partial withdrawal facility. Users are entitled to partially withdraw from the accumulated fund value once the ULIP policy completes the lock-in period of 5 years. However, there are notions related to the feature of partial ULIP withdrawal for a given ULIP policy that must be known to a user.
All You Need to Know About Partial Withdrawals
The following points should be looked at and considered before getting a comprehensive life insurance ULIP plan:
- Partial withdrawal limits:
- There are limits set by the insurer upon the withdrawal facility granted under a ULIP plan. After the expiring period of 5 years, users are allowed to withdraw partially upto 10 % of the total premium paid in most cases.
- It is best advised to make proper use of such a facility before one falls short of funds to cover the cost of the ULIP policy.
- Restrictions for withdrawal and the min-max limit may vary depending upon the insurance provider.
- Partial withdrawal before the lock-in period expires:
- A ULIP plan does not offer the facility of partial withdrawal before the lock-in period. The policy money can be accessed only after the lock-in period ends, even if the insured surrenders the policy.
- The withdrawal amount would be realised only after subtracting the ULIP charges incurred in case of a partial withdrawal before the lock-in period.
- Partial withdrawal after the lock-in period ends:
- Users are entitled to partially withdraw from their ULIP policy after the duration of 5 years.
- The withdrawal must have attained the age of 18 for using this facility.
- Limits are imposed on the withdrawal facility even after the lock-in period as per the policy terms and conditions.
- Policyholders aren’t allowed to withdraw their entire fund value before the maturity period or before surrendering their policy.
- Impact on the sum assured:
Making withdrawals from a ULIP policy affects the assured sum for life cover. These are the following cases:
- Restoration Policy: The sum assured automatically gets restored after the reduction period of 2 years from the date of withdrawal, given that no additional withdrawals were made within the two-year time.
- The realisation of reduced sum assured: This is the case in the event of the policyholder’s death within the two-year time period frame after the withdrawal was made.
- Consistency in premium payment:
In order to reap maximum benefits out of the ULIP plan, the policyholder must ensure regular payment of the premium amount. Partial withdrawals have no effect on the sum assured if this consistency is maintained and other criteria as per the particular policy are fulfilled.
The partial withdrawal facility provided under a ULIP plan makes this comprehensive life insurance cover uniquely different from others. However, enjoying the benefits, ULIP Returns offered under such a policy must not be taken for granted. A detailed review of the criteria in and around a ULIP policy is a must for anyone seeking to avail of such an option. In fact, check different ULIP plans from reputed insurers like Tata AIA Policy. The terms and conditions and withdrawal policies differ across plans. Hence, it is advised to check different policies and then take a final call.