Kotak Life
Close

Buy a Life Insurance Plan in a few clicks

Close

Now you can buy life insurance plan online.

Kotak e-Term Plan

Kotak e-Term Plan provides a high level of protection to your loved ones in your absence. Know more

Kotak Guaranteed Savings Plan

Kotak Guaranteed Savings Plan is a savings and protection plan that helps you achieve long-term financial goals and provides an insurance cover against any eventuality. Know more

Kotak E-Invest

Kotak e-Invest plan is a complete Unit-Linked Insurance Plan that can be customized as per your goals and needs. Know more

Kotak Health Shield

Kotak Health Shield Plan helps secure your finances in sudden medical expenses such as Cardiac, Liver, Neuro, and Cancer (all early and significant illness stages/conditions of cancer), along with offering protection for personal accidents - in case of accidental death or disability. Know more

Kotak Lifetime Income Plan

Kotak Lifetime Income Plan gives you the security of your income continuing throughout your life and in your absence throughout your spouse's lifetime! Know more

Can I Surrender My ULIP Policy after 2 Years?

Can I Surrender My ULIP Policy after 2 Years?
  • 25th Mar 2022 |
  • 369

When you opt-in for a ULIP policy, the primary motive should be a long term investment. Unit linked insurance plans give you the benefit of both life insurance as well as an option to invest in the market in a single policy. Also, the longer you keep the money invested in plans like ULIPs, the better returns you will get. However, there are a lot of reasons behind people wanting to surrender ULIPs, and it is absolutely alright to surrender a policy if you have an unexpected financial emergency.

Before planning to discontinue ULIP, a policyholder must do their research about lock-in period, the tax implications on surrender value, and the consequences of surrendering the policy before the ULIP lock-in period.

This article will help you learn if a policyholder can surrender ULIPs after two years, whether they have to pay tax if they do not complete the ULIP lock-in period and other important details.

Can a Person Surrender ULIPs after Two Years?

Yes! A policyholder can surrender a policy as per his/her wishes. However, it is made clear while opting for the policy itself that it has a minimum lock-in period of 5-years. Therefore, surrendering ULIPs before completing maturity is not advised and will result in penalty charges and tax implications on surrender value.

So, experts highly advise that a policyholder must complete the tenure of a ULIP policy and serve the lock-in period to avoid penalties and taxes and reap the benefits of maturity of their ULIP policy.

Disadvantages of Surrendering ULIP policy Before 5-Year Lock-in Period

If you discontinue ULIP policy before completing the lock-in period of 5-years, it will have repercussions. Of course, if the policyholder, despite being aware that there is a mandatory five years lock-in period in ULIP, wishes to surrender the policy, he is free to do so. Following are the disadvantages of surrendering ULIPs before its mandatory 5-year policy tenure:

  • Even if the policy is surrendered before five years, the policyholder or the nominee will get the money only after 5-years. However, the policyholder will receive the money only after five years of tenure, not with the fund value calculated on the day of policy surrender.
  • Once you have surrendered the policy, certain discontinuation charges are first levied, and then the remaining amount of the fund value is moved to the Discontinued Policy (DP) fund.
  • When the fund is moved to the DP Fund, the insurer may levy an additional fund management charge. This amount cannot exceed 0.5% of the total DP fund value.
  • You will still get an interest of approximately 4% per annum on the DP fund as per the policy guidelines.

Tax implications on surrender value

Suppose you surrender a ULIP policy before the minimum lock-in period. In that case, the whole amount received will be calculated as income for the year the policyholder has received, and tax will be changed as per the tax slab they fall into after adjusting this fund to income for that particular, fiscal year.

In conclusion, you can surrender ULIPs before five years. But it is not advised to surrender the fund value on maturity, and other maturity benefits of ULIPs are a great deal.

Kotak e-Term Plan

Features

  • Nominal Cost
  • Multiple Plan Options
  • Flexible Payout Options
  • Critical Illness Rider
  • Tax Savings
  • Long term Coverage

Ref. No. KLI/22-23/E-BB/492

T&C

Browse our library of resources

- A Consumer Education Initiative series by Kotak Life

Similar Articles

Insurance Policy for Housewife In India

Does Your Term Insurance Plan Cover Death Due to COVID-19?

What Happens to Term Insurance Plan With No Beneficiary - Kotak Life

How Much Cover Should I Take In A Term Plan?

8 Benefits of Term Insurance You Should Know

When is the Right Time to Buy Term Life Insurance Policy for Yourself?

Do You Need Term Insurance Cover After Retirement?

Is a Term Insurance Policy Portable?

Ensure Protection Against Death, Disease & Disability With Life Insurance

Different Types of Premium in Term Insurance

Can I Get Term Insurance on Behalf of My Spouse?

How to Identify Term Insurance According to Your Needs?

Term Insurance: Most Common Term Insurance Myths Explained | Kotak Life

All About Term Insurance Inbuilt Coverage

Insuring Protection Against Death With Death Insurance Rider

What Should Be The Duration Of Your Term Plan in India?

Which Term Insurance to Choose: Lump Sum or Staggered Pay-out Plan?

What Is the Correct Age to Buy Term Insurance?

Tax Benefits of Term Insurance in India

Term Life Insurance Plan for Smokers vs Non-Smokers

Should Youngsters, Working Couples Buy Term Insurance Plans?

Individual Life Insurance vs. Group Term Life Insurance

Can Non-Resident Indians (NRIs) Buy Term Insurance In India?

Why Term Insurance Is Important in times of COVID-19?

8 Things To Do After Buying Term Insurance

Is it a Good Time to Buy Term Insurance During the COVID-19 Pandemic?

Why Premium Amount for Term Insurance is So Low?

5 Benefits of Early Retirement Planning

Why does every working woman need life insurance?

Make Your Online Term Plan Your Familys Monthly Payout

5 Term Insurance Benefits for Single Women

Gift Your Father A Term Insurance Plan This Father's Day

Is There Any Tax Benefit on Term Insurance?

Insuring Against Accidents with an Accidental Death Insurance Rider

6 Types of Death not covered in Term Insurance Plan

Can I Buy Term Insurance for a COVID-19 Patient?

How Much Term Life Insurance Cover Do I Need in India?

Key IRDAI Regulations That Changed Face Of Term Insurance Industry In 2020

How to Ensure That Your Term Insurance Claims Are Never Rejected?

How To Calculate The Amount Of Term Life Insurance You Need?

Increasing Term Insurance and Riders

Can Term Insurance Plans Be Purchased As A Gift?

How to Buy 1 Crore Life Insurance Policy Without Medical Test

Advantages & Disadvantages of Term Insurance in India

What All Documents Required For Term Insurance In India?

Why is it important to buy term insurance plan?

Key Differences Between Term Insurance, ULIPs, And Health Insurance

What Happens if you Hide Facts in your Term Insurance?

8 Factors to consider before choosing a Critical Illness Insurance

Why Term Insurance Is Better Than ULIP?

Top 3 Reasons Why You Should Buy A Term Plan Now

What is a Joint Term Insurance Plan? Key Benefits of Joint Term Plan

Why Term Plan Should Be The First Step To Securing Your Future?

Choosing Riders for Insurance Plans

How Not To Get Your Term Insurance Claim Rejected

6 Reasons That Make Term Insurance a Must Buy

How Does A Term Life Insurance Work in India?

Ideal Features of a Suitable Term Plan - Act Now for a Stress-free Future

Why Surrendering Your Term Plan Policy In The Final Phase Maybe A Bad Idea?

What Is a Renewable Term Insurance Policy?

9 Most Frequently Asked Questions on Term Insurance

What are incremental term insurance plans?

How Does Term Life Insurance Work? Learn the Benefits

How Much Term Insurance Do I Need

Why Should You Add a Rider to a Term Insurance Plan?

How to Compare Term Insurance Online

Is It Good To Buy A Term Insurance Plan In 2022?

Protection for your family

What Types of Deaths Are Covered in a Term Insurance Plan?

Why 1 Cr Term Plan Is Necessary For Family?

Planning For Son or Daughter's Wedding

Difference between Term Insurance and Life Insurance

Does Term Insurance Cover Accidental Death?

Reasons You Need Term Insurance Plan as a Self-Employed Person

Term Insurance with Critical Illness

Term Plans are Definitely Cheaper than You Think!

How To Change The Nominee in Term Insurance?

Term Insurance: What Happens When You Don’t Pay Your Premiums?

What is the Right Term Period For Term Insurance Policy? Here's How You Should Choose!

What is Insurance Premium - A Detailed Guide

What Are Insurance Riders and How to Choose Them in a Term Plan?

Is term Insurance Needed for People With No Dependents?

What is a short term insurance policy?

Why Should You Not Take A Term Plan Without Medical Test in India?

Should You Buy a Term Plan After 40?

5 Things To Consider While Buying Term Insurance Plan

Steps on How to Buy Term Insurance Online

Best Investment Plans for Children - Secure Your Child's Future

5 Reasons to Buy Term Insurance When You are in Your 30s

Why Buy Term Insurance Even at Rising Rates?

Why should single women purchase term life insurance?

Should You Have Multiple Term Life Insurance Policies?

Why Buying a Term Plan Is Smarter Than Traditional Life Insurance Products

Tips to Choose the Right Term Period for Term Insurance Plan

Know How to Invest at Every Age for Larger Returns

9 Ways to Help Family Members in Financial Trouble

Term Insurance Basics You Should Know

What Should You opt for - Limited or Premium Pay?

Different Types of Protection Plans

Busting Myths and Facts About Term Insurance Policies

How To Choose the Right Term Insurance Plan?

Term Insurance Plans and Policies for Smokers

How To Choose the Right Sum Assured Under a Term Plan?

Which Death Type Does Your Term Plan Not Cover?

4 Methods to Calculate How Much Term Insurance You Need

Can You Increase Your Term Insurance Cover?

10-Year Term Life Insurance Policy - Explained in Detail

Understanding Term Insurance Riders

What Is a Passive Income? Why Should You Use It to Buy a Term Plan?

Comparing Term Plans – What Should You Look Out For

What Are the Best Term Insurance Plans for Planning Retirement?

Everything About Claim Settlement Ratio for Term Insurance

Planning For Children's Future

Cost of Term Insurance Likely to Increase Soon

Is ₹1 Crore Term Insurance Good Enough Cover?

Buying A Term Insurance Plan? Take These Factors into Account

Eligibility Criteria for Buying Term Insurance in India

Do Beneficiaries Pay Taxes on Term Insurance?

4 Things To Expect From Your Term Insurance Plan in India

Can I Extend the Tenure of My Term Insurance Plan?

What are the Documents Required for Term Insurance Plan?

Make Your Online Term Plan Your Family's Monthly Pay Cheque

Term Insurance Age Limit – Term Plan for All Age Groups

Can A Housewife Buy a Term Insurance Plan - All You Need to Know

Are The Add-ons and Optional Features of Term Insurance Plans Actually Beneficial?

All you need to Know about Term Insurance Plans for Housewives

Why Buy Term Insurance Plan With a High Cover?

टर्म इंश्योरेंस क्या है? टर्म इंश्योरेंस का मतलब

Can Senior Citizens Avail Term Insurance?

Buying A Term Insurance? Don't Ignore the Claims Settlement Ratio

Why Should You Buy Term Insurance in 2022?

Is Term Life Insurance Plan an Investment or Expense?

Endowment Plans vs Term Plans: Understanding the difference

Importance of Term Insurance at Every Stage of Your Life

Term Insurance With Riders In India

Term Plan with Spouse Cover

Calculating Term Insurance Premium

Why Married People Should Buy Term Insurance Under MWP Act?

Term Insurance Calculator - Everythng You Need To Know

Insuring yourself against Ill Health with a Critical Illness Rider

Why Should New Parents Buy Term Life Insurance?

Insuring Against Disability With Disability Insurance Rider

4 Reasons Why You Need Critical Illness Cover

Do I Need to Give a Medical Test for Term Insurance in India?

Advantages of Buying Term Insurance in Your 50s

What is Form 16, Form 16 part A, Form 16 part B, Information Required and FAQs

While Buying Term Insurance Compare Features, Not Just Premiums

What is Critical Illness Policy

What is Term Insurance - A Complete Guide

Term Vs. Whole Life Insurance: Which One You Should Buy in India?

Term Insurance: Smokers vs Non-Smokers

Is Group Term Life Insurance Provided By Employer Sufficient?

Online vs Offline Term Insurance: Which Is The Better Option To Buy

How to Surrender Term Life Insurance When you have No Liabilities

Term Insurance – Why You Must Include In Your Financial Planning?

Is Life Insurance Investment Worthy Enough

Can I Make Changes to My Term Insurance Policy Post Purchase?