As most of you know, the Unit Linked Insurance Plans (ULIPs) combine the benefits of a life insurance plan along with investments. It gives you the liberty to invest in funds of your choice. You can also withdraw a lump sum amount when needed, thus making the policy flexible.
In this article, we will be discussing in detail regarding the withdrawal conditions for ULIP plans. Let us begin by understanding the types of withdrawal in ULIPs.
Types of Withdrawals in ULIPs
You can withdraw a lump sum amount from your ULIP investment before the policy matures. This flexibility, however, comes with a few limitations and conditions. Hence, you must know the types of withdrawals in a ULIP plan before you plan to make money from it.
1. Withdrawals Before The Five-Year Lock-In Period
It is noteworthy that partial withdrawals before the policy lock-in period are not possible. Here, even if you plan to surrender or discontinue your ULIP policy, you will receive the money after the lock-in period ends.
2. Withdrawals After The Five-Year Lock-In Period
You can avail the partial withdrawal facility only after the five-year lock-in period ends. But you avail this feature, here are a few things that you need to take into consideration.
- Have you made any top-up payments towards your ULIP plan? If yes, then the insurer will settle the withdrawal amount from the top-up amount at first.
- If you have made no top-up payments, then the amount utilized for withdrawal comes from the base fund value.
- If your top-up amount has not completed the five-year lock-in period, then the amount used for withdrawal comes from the base fund.
On the other hand, if you (the investors) is a minor, then the partial withdrawal can be made only after they are 18 years of age or above.
Partial Withdrawal and Life Coverage
Generally, people are worried about the impact of partial withdrawal on life insurance coverage. You might be too. Whether the partial withdrawal facility reduces the sum assured amount upon your death, is a question that most of you may have by now.
Let us tell you this. This is entirely dependent on the amount you withdraw from the two-year term before your demise. In that case, the partial withdrawal feature will decrease the sum assured for life insurance.
However, if the withdrawal was made more than two years ago, then the sum assured amount will be unaffected.
Limit on Withdrawal
The amount of money that you can withdrawal has no such limit. However, as a smart investor, you should leave enough funds that will help you cover the cost of the ULIP plan. You cannot withdrawal the whole amount or too much of the amount as it will lead to the policy termination.
For this purpose, every insurer has imposed a limit on the amount to be withdrawn. This limit varies across investors and different ULIP plans. A standard ULIP plan will allow you to withdraw up to 10% of the total premiums paid. However, certain standard plans will enable you to withdraw 20% of the total premiums paid. Note that withdrawal facility is possible only after the five-year lock-in period is over.
Certain policies have a limit based on the fund value. For instance, the fund value after the partial withdrawal should be at least three times the annual premium amount paid. Other policy may impose that post-withdrawal, the fund value should be at least the same as the value of one-year of premium paid. Some insurers have a cap on the minimum amount that you can withdraw from the ULIP plan.
You should also be aware of the limit imposed on the number of withdrawals. This is basically the number of times you can withdraw money from your ULIP plan. Again, this limit is different for different policies and insurers. In some cases, you are allowed to make partial withdrawals only after three months interval period.
A ULIP calculator is a tool that is specially designed to help you and other investors to calculate the premium amount and check the ULIP returns. Based on the input – the premium amount and policy tenure – the ULIP calculator will calculate the ULIP returns offered by the plan you have chosen.
A Final Thought
To continue to enjoy the partial withdrawal facility in your ULIP plan. Keep paying the premiums on time. If you miss out on the premiums, it will impact your ULIP benefits and restrict you from using the partial withdrawal features.
Are you looking for ULIPs to invest?
Get in touch with us at Finserv MARKETS and explore Bajaj Allianz Life’s different ULIP plans. With the ULIPs available on our platform, you can take advantage of dual-benefits, build your wealth over time and gain tax-benefits, while protecting yourself and your loved ones.
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