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What Happens if You Don’t Pay Your ULIP Premiums?

By Finserv MARKETS - Jun 3,2019
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what happens in case of non payment of premiums in ulips?

Unit Linked Insurance Plans have become one of the most popular investment tools given its versatile nature and multiple benefits. Besides offering a life cover along with market-linked returns, ULIP plans also provide amazing tax benefits. However, in order to truly benefit from investments it’s important to stay invested for the long term i.e. at least 10 years. Yet certain investors are unable to continue their investments due to financial constraints or other commitments. So what happens in such a situation? Does the investor get the investment back? Does the company charge any penalty? These are some of the most common questions that haunt investors. Here’s what actually happens if you are unable to pay your ULIP premiums: –

1.Capital Erosion 

If you stop paying premiums before one year of the completion of the policy, you will lose all the money that you invested.

2.No Penalty 

If you are finding it hard to pay premiums after staying invested for a year, you can stop paying the premiums. There would be no penalty charged for this. However, you will not be allowed to withdraw the amount until the lock-in period of five years is completed.

3.Pre-Dated NAV

If you stop paying the premium after a year and withdraw the amount on completing the lock-in period, you get paid on the Net Asset Value of the year in which you stopped paying the premium as opposed to the NAV of the current year.

4.Expenses

Charges like fund management charges, annual charges and surrender charges will be deducted from your investment corpus before you make the withdrawal after the lock-in period.

5.No Life Cover

Once you stop paying the ULIP premiums, the life insurance cover will immediately cease to exist.

6.Limited Death Benefit

If you have not paid the premium for 3 or 5 years and happen to meet with an untimely death, the death benefit given would amount to the value of the fund.

7.Revival

If you wish, you can revive your plan after 3 or 5 years depending upon the rules and statutes of the insurance company you are invested with.

As you can see, discontinuing payment of premiums in case of ULIPs can actually cost you money and lead to additional losses. Hence, if you plan to make an investment, make sure that you check all the other financial commitments before investing. By investing in ULIP plans, such as Bajaj Allianz Future Gain and Bajaj Allianz Goal Assure, you get the flexibility to invest according to your budget and financial needs. What’s more, you can choose from a variety of unit linked insurance plans as per your long term goals and aspirations. To know more or invest in ULIP plans, visit our platform. Just remember that unit linked insurance plans are a long-term investment tool and will only be beneficial if you are prepared to stay invested for the long run. So you should definitely keep paying your premiums on a timely basis.

Also read in detail about the ULIP tax benefits you can avail with investment plans available on Finserv MARKETS.

To know more on ULIP investments in depth, you can check out these blogs:

Finserv MARKETS, from the house of Bajaj Finserv, is an exclusive online supermarket for all your personal and financial needs. Loans, Insurance, Investment, and exclusive EMI store, all under one roof- anytime, anywhere!

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Bajaj Finserv Direct Limited ("BFDL"), erstwhile Bajaj Financial Holdings Limited is a registered corporate agent of Bajaj Allianz Life Insurance Company Limited and Bajaj Allianz General Insurance Company Limited under the IRDAI composite registration number CA0551 valid till 10-Apr-2021. BFDL also renders services to Bajaj Finance Limited (‘BFL’) and Bajaj Housing Finance Limited (‘BHFL’) (referred hereinafter as ‘Lending Partner’) in sourcing of customers, providing preliminary credit support activities, fulfilment services and post-acquisition customer services related to lending business. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522