How to Withdraw ULIP Policy?

In this policy, the investment risks in the investment portfolio is borne by the policyholder

How to Withdraw from a ULIP Policy?

The Insurance Regulatory and Development Authority of India (IRDAI) understand that investors may have to face financial emergencies. To allow them to take care of their finances without having to pay large penalties, the IRDAI allows partial withdrawals from ULIPs and the ability to receive the maturity amount in staggered instalments over five years. You can request a withdrawal only if all premiums have been paid on time and if you meet the conditions set by the IRDAI and your insurance company. You can then submit a withdrawal request to receive the necessary funds.

Types of ULIP Withdrawals

Before the Five-Year Lock-In Period Ends

ULIPs do not allow withdrawals during the five-year lock-in period. However, you may choose to surrender your policy during this time. Once you surrender or discontinue the plan, you must wait until the end of the lock-in period to receive the amount due.

After Five Years

Once you complete the lock-in period, you become eligible to make partial withdrawals from the accumulated corpus. If you have made a top-up payment towards your plan, and the top-up has completed the five-year lock-in period, your insurance company will provide the withdrawal amount from the top-up fund. If you have not made a top-up payment, the amount will come from your base fund. Ideally, try to keep your withdrawals to a minimum to avoid impacting your ULIP growth and benefits.

Impact of ULIP Withdrawals on Life Coverage

The amount you withdraw from the corpus impacts your life insurance coverage. For every partial withdrawal, your sum assured amount could get decreased. Ensure you check your policy documents for all terms and conditions before requesting to withdraw funds. When you withdraw funds, you also impact your fund value. Your total investment amount decreases due to the amount withdrawn. Many insurance companies limit the amount you can withdraw and the number of partial withdrawals allowed within a policy tenure or policy year. Check your policy documents thoroughly to avoid negatively impacting your finances.

Limits on ULIP Withdrawals

Every insurance company has imposed limitations on the maximum amount you can withdraw from your ULIP. Most often, you cannot withdraw more than 10% or 20% of the accumulated funds. Withdrawing a large amount could lead to policy termination. Depending on your insurance company, you may have limits on the maximum amount you can withdraw from the fund and how you can use it. Most ULIPs only allow withdrawals if you use the funds to pay for higher education, a child’s marriage expenses, or for home construction. Remember, the withdrawal facility is only available once you complete the five-year lock-in period. Additionally, your insurance company may restrict the number of withdrawals allowed in a policy year and how frequently you can make them. Ensure you read and understand your policy’s terms before requesting withdrawals.

Important Points to Keep in Mind Before Withdrawing Funds

Before requesting a withdrawal, ensure you:

• Understand all the conditions and limitations associated with it.
• Pay your premiums on time to avoid policy termination.
• Wait for the five-year lock-in period to end.
• Request only a partial withdrawal that leaves a majority of the funds untouched.
• Only request withdrawals in case of financial emergencies.

Final Thoughts

ULIPs enable you to build a corpus for the future while providing some financial assistance in emergencies. Ensure you pay all your premiums on time and keep the withdrawal restrictions in mind to enjoy the partial withdrawal feature. Minimise your withdrawal requests to secure your future and maintain your sum assured amount to safeguard your family’s finances.

ARN – MC/07/23/2979