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

What is Partial Withdrawal in ULIPs?

What is Partial Withdrawal in ULIPs?
  • 14th Mar 2021 |
  • 2,805

ULIP, or Unit Linked Insurance plan refers to an insurance plan that offers dual benefits, including an investment plan to fulfil your long-term goals and a life cover to financially protect your family during an unfortunate event. The premium amount that is paid towards ULIP is divided into two parts.

A part of it is contributed to your life cover, and the remaining is invested in the fund of your choice. ULIPs make inflation-beating returns on your investment possible when continued until the end of the policy term. However, it can also act as an interim source of funds if you face a financial shortfall during the policy period. You can redeem some of the units accumulated in your fund before the policy end date. This partial withdrawal facility helps you avoid digging into your savings, taking expensive loans, or having to sell your assets. One unique advantage of the ULIP plan is that you can take out a part of your accumulated fund value before the policy matures.

Now that you know what is policy withdrawal, let’s dive deep to know the details regarding how to withdraw ULIP policy and what are the limitations.

How Does Partial Withdrawal Work?

A part of the premium you pay for your ULIP provides a life insurance cover. The insurer invests the remaining amount in the financial instruments you select as per your capacity to bear market fluctuations. The pooled investment from all investors in a ULIP is divided into units. A price is assigned to each unit, known as the Net Asset Value (NAV). It is the price at which investors can purchase and sell ULIP units. The NAV goes up when the value of the underlying funds increases.

Based on the premium you pay; units are assigned to you. You can encash some of those units after the first five years from the ULIP start date, the lock-in period. The amount you receive depends on the total NAV of the number of units redeemed.

Premium allocation

A fixed premium needs to be paid if you invest in a ULIP. A part of the premium is used for providing coverag Replacement of income e, while the remaining part is invested in various capital market funds.

Withdrawal of funds

Part of the premium that gets invested is further divided into units. ULIP partial withdrawal allows you to redeem some of those units in case of any emergency.

How Does Partial Withdrawal in ULIP Affect Your Investment and Life Cover?

The worth of your investment, the fund value, gets reduced by the amount withdrawn. Moreover, your life cover amount is also lowered by a sum proportionate to the encashed amount. The coverage remains reduced for two years from the withdrawal date. Hence, in case of an unfortunate event during this interval, your nominee will receive a reduced payout.

However, the amount payable to your nominee is restored to the original sum assured after two years. But your fund value after these two years will depend on the prevailing NAV and the premiums you invest.

How to choose the right plan?

While planning to buy ULIP, it is advisable to check different plans that provide maximum benefits. In addition, various factors like stability, customer service quality, the reputation of the brand being opted for, etc., must be considered that can help the policyholder’s family financially during any unfortunate incident.

Here are some of the top features of the plan:

  • Financial protection: In case of any unfortunate incident, the nominee gets the claim amount along with the fund value.
  • Rewards: By regularly paying the premium amount and staying invested with the plan, you can get various loyalty additions and wealth booster benefits in your investment.
  • Top-up option: Investment from your premium amount can be increased anytime as per the policyholder’s convenience.
  • Flexible payment options: The premiums of ULIPs can either be paid monthly, half-yearly, or yearly.
  • Tax Benefit: Partial withdrawal from ULIP is taxable; therefore, you enjoy lots of benefits.

Terms and Conditions for Partial Withdrawal

  • On February 1, 2020, the Insurance Regulatory and Development Authority of India (IRDAI) made three partial withdrawals permissible during the entire ULIP tenure. You can make such withdrawals on your children’s wedding, their college admission, for buying property, and also if any critical illness strikes.
  • Partial withdrawals are possible only when the ULIP policyholder is at least 18 years old. Therefore, if your ULIP insures a minor, you have to wait until the child becomes an adult before making partial withdrawals.
  • The amount you withdraw is not taxable subject to the conditions under Section 10 (10D) of the Income Tax Act, 1961.
  • The sum you can withdraw depends on your insurance provider and your policy type. You must leave enough funds to cover operational costs and life cover charges.

Conclusion

Partial withdrawals can help you tide over financial crunches. But it affects the monetary benefit your loved ones are entitled to receive. Moreover, the returns you can expect at the end of the investment period also take a hit. Hence, financial experts advise against ULIP partial withdrawal unless it is an absolute emergency in order to avail the benefit of long-term capital growth.

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

Term Insurance Calculator - Everythng You Need To Know

Tips to Choose the Right Term Period for Term Insurance Plan

टर्म इंश्योरेंस क्या है? टर्म इंश्योरेंस का मतलब

Can Senior Citizens Avail Term Insurance?

Planning For Son or Daughter's Wedding

Why Term Insurance Is Better Than ULIP?

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

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

What is a short term insurance policy?

Different Types of Protection Plans

Is a Term Insurance Policy Portable?

How to Compare Term Insurance Online

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

Term Insurance With Riders In India

5 Things To Consider While Buying Term Insurance Plan

How to Buy 1 Crore Life Insurance Policy Without Medical Test

Is ₹1 Crore Term Insurance Good Enough Cover?

Insuring Protection Against Death With Death Insurance Rider

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

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

How to Surrender Term Life Insurance When you have No Liabilities

What Are the Best Term Insurance Plans for Planning Retirement?

9 Most Frequently Asked Questions on Term Insurance

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

Should Youngsters, Working Couples Buy Term Insurance Plans?

4 Reasons Why You Need Critical Illness Cover

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

8 Factors to consider before choosing a Critical Illness Insurance

Term Insurance with Critical Illness

Why Should New Parents Buy Term Life Insurance?

What Is a Renewable Term Insurance Policy?

What Should You opt for - Limited or Premium Pay?

Choosing Riders for Insurance Plans

Individual Life Insurance vs. Group Term Life Insurance

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

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

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

Why Buy Term Insurance Plan With a High Cover?

Why Should You Buy Term Insurance in 2022?

Advantages of Buying Term Insurance in Your 50s

How Does Term Life Insurance Work? Learn the Benefits

Understanding Term Insurance Riders

What are the Documents Required for Term Insurance Plan?

Why should single women purchase term life insurance?

Buying A Term Insurance Plan? Take These Factors into Account

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

Why does every working woman need life insurance?

Is Life Insurance Investment Worthy Enough

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

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

Increasing Term Insurance and Riders

Know How to Invest at Every Age for Larger Returns

Planning For Children's Future

Advantages & Disadvantages of Term Insurance in India

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

Eligibility Criteria for Buying Term Insurance in India

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

What is Insurance Premium - A Detailed Guide

Can I Extend the Tenure of My Term Insurance Plan?

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

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

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

Key Differences Between Term Insurance, ULIPs, And Health Insurance

Insuring yourself against Ill Health with a Critical Illness Rider

Endowment Plans vs Term Plans: Understanding the difference

Protection for your family

What are incremental term insurance plans?

Top 3 Reasons Why You Should Buy A Term Plan Now

Why Buy Term Insurance Even at Rising Rates?

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

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

Insurance Policy for Housewife In India

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

What All Documents Required For Term Insurance In India?

10-Year Term Life Insurance Policy - Explained in Detail

Why is it important to buy term insurance plan?

How Much Term Insurance Do I Need

Importance of Term Insurance at Every Stage of Your Life

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

8 Benefits of Term Insurance You Should Know

Is Term Life Insurance Plan an Investment or Expense?

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

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

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

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

Can I Get Term Insurance on Behalf of My Spouse?

How Not To Get Your Term Insurance Claim Rejected

6 Types of Death not covered in Term Insurance Plan

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

Term Insurance Plans and Policies for Smokers

Insuring Against Disability With Disability Insurance Rider

9 Ways to Help Family Members in Financial Trouble

Make Your Online Term Plan Your Familys Monthly Payout

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

All you need to Know about Term Insurance Plans for Housewives

6 Reasons That Make Term Insurance a Must Buy

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

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

While Buying Term Insurance Compare Features, Not Just Premiums

Why 1 Cr Term Plan Is Necessary For Family?

Does Term Insurance Cover Accidental Death?

Cost of Term Insurance Likely to Increase Soon

How To Choose the Right Term Insurance Plan?

Different Types of Premium in Term Insurance

Is Group Term Life Insurance Provided By Employer Sufficient?

Which Death Type Does Your Term Plan Not Cover?

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

How Does A Term Life Insurance Work in India?

Calculating Term Insurance Premium

What is Critical Illness Policy

Busting Myths and Facts About Term Insurance Policies

How Much Cover Should I Take In A Term Plan?

Is term Insurance Needed for People With No Dependents?

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

5 Term Insurance Benefits for Single Women

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

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

How to Identify Term Insurance According to Your Needs?

What is Term Insurance - A Complete Guide

Term Plans are Definitely Cheaper than You Think!

Tax Benefits of Term Insurance in India

5 Benefits of Early Retirement Planning

Term Life Insurance Plan for Smokers vs Non-Smokers

Term Plan with Spouse Cover

Everything About Claim Settlement Ratio for Term Insurance

4 Things To Expect From Your Term Insurance Plan in India

Ensure Protection Against Death, Disease & Disability With Life Insurance

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

Do Beneficiaries Pay Taxes on Term Insurance?

Should You Have Multiple Term Life Insurance Policies?

Comparing Term Plans – What Should You Look Out For

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

Term Insurance Basics You Should Know

Is There Any Tax Benefit on Term Insurance?

Why Premium Amount for Term Insurance is So Low?

All About Term Insurance Inbuilt Coverage

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

Can Term Insurance Plans Be Purchased As A Gift?

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

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

Should You Buy a Term Plan After 40?

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

Term Insurance Age Limit – Term Plan for All Age Groups

What Is the Correct Age to Buy Term Insurance?

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

Why Married People Should Buy Term Insurance Under MWP Act?

Insuring Against Accidents with an Accidental Death Insurance Rider

Difference between Term Insurance and Life Insurance

8 Things To Do After Buying Term Insurance

Term Insurance: Smokers vs Non-Smokers

What Happens if you Hide Facts in your Term Insurance?

Do You Need Term Insurance Cover After Retirement?

4 Methods to Calculate How Much Term Insurance You Need

How To Change The Nominee in Term Insurance?

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

Steps on How to Buy Term Insurance Online

Can You Increase Your Term Insurance Cover?