Partial Withdrawal Of ULIPs: All You Need To Know?

2024-08-02

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Often considered among the most prudent financial instruments available today, the unit-linked insurance plans or ULIPs offer the unique advantage of life insurance protection and wealth appreciation through investments – all under the same plan. Essentially, ULIPs have a lock-in period of five years, while your money is invested in various market-linked fund options of varying degrees of risks. One of the several advantages of ULIP investments is the availability of partial withdrawals, wherein you can easily withdraw money from the acumuated fund value to take care of any urgent requirement. After the completion of the lock-in period, you can make partial withdrawals. However, this flexibility that ULIPs offer comes with a few terms and conditions.

Limits on Partial Withdrawal

Typically, there is no fixed limit on the amount which you can withdraw from your active ULIP policy. However, it is advisable that you do not overuse this facility so much that there are not enough funds left to help cover the ULIP cost. Otherwise, it could lead to policy termination. The limits of partial withdrawals of ULIPS may vary from one insurer to another. Usually, you can make withdrawals of up to 10 percent of the total amount of premium paid, but only after completing the mandatory lock-in period. Also, the incusrance company may introduce other limitations such as those on the minimum amount or the number of partial withdrawals made in a year. Therefore, you must go through the policy document of your ULIP plan to know more about these terms and conditions, while making sure that you keep paying the premiums on time.

Making Partial Withdrawals Before the Completion of the Lock-in Period

There is no provision under ULIPs to make partial withdrawals before the end of the mandatory lock-in period of five years. Even if you decide to surrender or discontinue the ULIP policy during the lock-in period, you can expect to receive the money (after deduction of surrender and policy discontinuation charges, as applicable) only after completing the five-year period.

Making Partial Withdrawals after the Lock-in Period

As the policyholder, you are eligible to make partial withdrawals after the lock-in period is over. There are, however, specific points that you need to consider before making any withdrawals from the accumulated funds. You cannot withdraw the entire accumulated fund amount before maturity, or without surrendering or discontinuing the policy. If you have purchased the ULIP plan for your child, who is a minor, he or she can make partial withdrawals from the policy only after turning 18.

Effect of Partial Withdrawal on Life Cover

There are chances that you might worry about if there would be any effects of making withdrawals on your insurance coverage? Usually, every partial withdrawal you make leads to a decrease in the sum assured under the ULIP life coverage. In case you have made the withdrawal more than two years before the unfortunate demise of the policyholder, there will be no effect on the sum assured. Here, you must go through the policy document to learn about how partial withdrawals work for your chosen plan coverage.

Regular Payment of Premium is Crucial

To avail of the several benefits of the ULIP plan, including partial withdrawal facility, it is essential that you always pay the premiums as per schedule, keeping the policy active without any interruptions. In case there are any lapses, suspensions or disputes in payment of premiums, the insurance company may disallow further partial withdrawals.

The amount withdrawn after completing the lock-in period is tax-exempt; thus, you can fulfill your immediate life goals with the accumulated funds under ULIP without any tax implications. However, you must adhere to the maximum number of partial withdrawals that you can make in a year, as specified in your policy underwriting so that you can avail of maximum benefit from your ULIP investment.

The Invest 4G plan from Canara HSBC Life Insurance allows you to maximize your accumulated wealth by investing your savings across seven different fund options. At the same time, you can make partial withdrawals to fulfill your family’s immediate financial needs. Furthermore, the Invest 4G enables you to customize your ULIP coverage by selecting death benefits, premium payment, and maturity benefits based on your requirements.

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