Can I Surrender My ULIP Policy After 2 Years?
Close
Close

Buy a life insurance plan in a few clicks

Now you can buy life insurance plans completely online right here.

  • Icon for Kotak Preferred e-Term Plan

    Kotak e-Term Plan

    Kotak e-Term Plan is a pure term plan that provides a high level of protection to your loved ones in your absence.

  • Kotak E-Invest Plan

    Kotak e-Invest is a comprehensive Unit Linked Life Insurance Plan that can be customized as per your goals and needs - be it protection; investment; financial security for child or retirement planning.

  • Icon for Kotak Guaranteed Savings Plan

    Kotak Guaranteed Savings Plan

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

  • Icon for Kotak Preferred e-Term Plan

    Kotak Lifetime Income Plan

    Kotak Lifetime Income Plan gives you the assurance of your income continuing throughout your life and in your absence throughout the lifetime of your spouse!

  • Icon for Kotak Preferred e-Term Plan

    Kotak Health Shield

    The Kotak Health Shield Plan helps secure your finances in times of sudden medical expenses related to illness such as Cardiac, Liver, Neuro and Cancer (all early and major stages of illness /conditions of Cancer); along with offering protection for Personal Accident - in case of accidental death or disability.

Close

Get a Call

Enter your contact details below and we will get in touch with you at the earliest.

  • Select your Query

Thank you

Our representative will get in touch with you at the earliest.

Back

Can I Surrender My ULIP Policy after 2 Years?

View Plans
  • 25th Mar 2022
  • 115

Can I Surrender My ULIP Policy after 2 Years?

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.

- A Consumer Education Initiative series by Kotak Life

Also read

    • 2nd Mar 2022
    • 166

    What are the things to consider before buying ULIPs?

    Before buying a ULIP plan, understand all of the variables involved to make an informed decision. Read more about what are the things to consider befo...

    Read more
    • 24th Feb 2022
    • 250

    Why Should You Invest in NPS?

    Know the key benefits of an NPS (National Pension System) scheme here. Tax benefits, risk level, returns ratio and more to plan your retirement.

    Read more
  • Meaning of Sum Assured in a ULIP

    Sum Assured in Unit Linked Insurance Plan |Find the definition of sum assured in ULIP here on this article. Visit Kotak Life to know more on ULIP

    Read more

Related Plans

  • Kotak Credit Term Group Plan

    Kotak Credit Term Group Plan

    Kotak Credit Term Group Plan provides life cover to a group of borrowers of credit institutions where the life assured is the borrower and the credit ...

    Know more
  • Kotak Group Assure

    Kotak Group Assure

    Kotak Group Assure Plan protects the family of the life insured from risk of loan liability in case of the demise of the insured and it also shields c...

    Know more
  • Kotak POS Bachat Bima

    Kotak POS Bachat Bima

    Kotak Life Insurance presents a simple savings and protection oriented plan, which provides all guaranteed benefits while giving life insurance cover ...

    Know more
  • Kotak Assured Pension

    Kotak Assured Pension

    Kotak Assured Pension is an annuity plan that promises to pay a regular stream of income on immediate basis or post deferment period for life, ensurin...

    Know more