Close
Close

Buy a Life Insurance Plan in a few clicks

Now you can buy life insurance plan online.

Kotak Guaranteed Fortune Builder

A plan that offers guaranteed income for your future goals. Know more

Kotak e-Term

Protect your family's financial future. Know more

Kotak Assured Savings Plan

A plan that offer guaranteed returns and financial protection for your family. Know more

Kotak Guaranteed Savings Plan

A plan that offers long term savings and life cover. Know more

Kotak e-Invest

Insurance and Investment in one plan. Know more

Kotak Lifetime Income Plan

Retirement years are the golden years of life. Know more

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.

Can I Surrender My ULIP Policy after 2 Years?

Yes! You can surrender a ULIP policy after 2 years. However, before planning to discontinue ULIP, you must research the lock-in period, the tax implications on surrender value.

  • Mar 25, 2022
  • 5,909 Views

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.

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

Kotak e-Invest

Download Brochure

Features

  • Return of Mortality Charges*$
  • Enhanced Protection
  • Multiple Plan Options
  • Zero Premium Allocation Charges
  • Tax Savings^

Ref. No. KLI/22-23/E-BB/521

T&C

- A Consumer Education Initiative series by Kotak Life

Similar Articles

What is Money Management? Definition & Example

Top 10 Investment Strategies to Create Wealth

Here's Myths on Investments in ULIP Plans

Is This The Right Time To Invest In ULIP? Why or Why Not?

How Can ULIPs Help You Plan for Your Child's Future?

6 Important Tips to Maximize Your Gains with ULIP Investments

Unit-Linked Life Insurance (ULIPs) vs. Term Insurance

यूनिट लिंक्ड इंश्योरेंस प्लान में लॉयल्टी एडिशन कैसे काम करते हैं

Factors Affecting Share Prices In The Stock Market

How to Choose the Best ULIP Plans to Invest in 2022?

How to Cancel ULIP Policy?

Tax-Deferred Savings Plan: Overview, Benefits, Works

Are Investment Returns Guaranteed in a ULIP?

What are the things to consider before buying ULIPs?

What are loyalty additions, and how do they work in a ULIP?

Here's Whether You Should Link ULIP Plan with your Term Insurance

How to Calculate Your ULIP Returns?

Beginner's Guide to Wealth Creation: Meaning, Strategies, & Importance

Why ULIP is Better Investment for Long-Term Wealth Creation?

ULIP Plan as a Gift

How to Increase Net Worth Along with Family Protection

यूलिप के फायदे और नुकसान क्या हैं?

Planning for Your Child's Higher Education? Explore These Investment Options

How to Manage Your Portfolio Like a Professional?

How To Invest Money In ULIP?

What are Some of the Safest Investment Options in India?

ULIP Plan or Traditional Insurance Plans - Which is better?

How to Plan your Investment to Achieve Periodic Financial Goals?

What are Fixed Maturity Plans and Why Should I Invest in Them?

Top 5 Investment Options in 2022 for Healthy Returns

Here's Why it's a Good Time to Explore ULIPs as an Investment

Are Gains from ULIP Sale Taxable?

What is Mutual Funds? | How Mutual Funds Work, Definition

How to Build a Strong Financial Foundation For the Future?

Best Investment Options to Cover Your Child's Education

Receiving regular payouts at various stages of life

Is ULIP a Complex Financial Product?

Single Premium ULIP or a PPF - Which One is Better?

What is Fund Value in ULIP?

Successful Financial Planning for Urban Women

Why are ULIPs One of the Best Tax Saving Instruments?

What are Financial Assets & their types?

ULIP Vs Life Insurance Plan Know the Difference

Different Types of ULIP Investments in India

Why Should You Invest in NPS?

ULIP policy: What happens when you stop paying ULIP policy premium during lock-in period

What Is a Credit Score? Definition, Factors, and Ways to Raise It

How ULIPs can help you achieve your financial goals

How Can ELSS Funds Help You Save Tax & Create Wealth?

Top ULIP Myths That You Must Stop Believing In

Got a Salary Hike? Here’s How to Plan your investment further

ULIP Investment Strategy: Top Tips to Improve Your ULIP Gains

Four Financial Lessons from The Vedas on Living Life to The Fullest

Can You Invest in Both Term Insurance and ULIP?

The lesser-known facts about ULIP policy that customers should be aware of?

वित्तीय संपत्तियां और उनके प्रकार

ULIPs: Suitable for all

Why Should I Invest in ULIP?

ULIP Frequently Asked Questions (FAQ) - Kotak Life

Early Investing and the Power of Compounding

Best One-Time Investment Plans in India

What are the Best Investment Options for Young Adults?

Importance of Portfolio Management

What are the Maturity Benefits in a ULIP Plan: Fund Value Sum Assured or Only Fund Value?

5 Reasons Why ULIP Plans are One of The Best Retirement Planning Instruments

What is a Child Money Back Plan, and How Does it Work?

What is Savings and the Importance of Saving Money

What is SIP Calculator, and How it Works?

Investments Options to Buy a house in India

Customising investments to manage your wealth

Learn About Safe Investments with High Returns in India

Can NRIs Invest in ULIP Plans Offered in India?

Best Investment Plans For You To Invest In 2023

How to Plan Your Child's Education - A Step-by-Step Guide

How Can ULIP Plan be as an Investment for Your Child

Difference Between ULIP and Endowment Plan?

What is NAV in ULIP, and How is it calculated?

Savings Plan for Grandchildren

Know Why You Should Stay Invested in Your ULIP Plan

Why Should You Build an Emergency Fund?

Top 5 Principles That Need to be Followed for Wealth Creation

What are Index Funds, and How Do They Work?

ULIP Tax Benefits: यहां निवेश करने पर मिलते हैं 5 बड़े फायदे

What Is Social Impact Investing and How Does It Benefit Society?

How to Manage Inheritance Money?

4 Rules To Keep In Mind To Secure Your Child’s Future Financially

What is the Estimated Return Percentage on ULIP? Do Investors Get Compound Interest?

How to Apply for Death Claim Benefits in ULIPs - Kotak Life

Will You Need to Withdraw or Surrender Money From ULIP

Here's are the uses of ULIP your must be aware of

How Safe is it to Invest in ULIP plans?

How Increasing Your SIP Every Year Helps You Reach Your Financial Goal Sooner?

यूलिप के फायदे (Benefits of ULIP in Hindi)

What is ULIP Plan, and How Does it Work?

Develop an investing plan

Are Money Back Policies Helpful? A Complete Guide

Difference Between Guaranteed Savings Plan and ULIP

ULIP Withdrawal Conditions - Before and After 5 years

Is ULIP A Good Investment Option?

उच्च रिटर्न प्राप्त करने के लिए सर्वश्रेष्ठ इन्वेस्टमेंट विकल्प

What is Lock-In Period in ULIPs?

यूलिप में 8 शुल्क जो आपको अवश्य जानना चाहिए

Can ULIP Help in Achieving Short-Term Financial Goals?

Do ULIPs Give Good Returns On Investments?

Building wealth through regular investing

How to Create Short-Term and Long-Term Wealth with ULIPs - Kotak Life

How to Save Money from Salary?

What are the Best Investment Options For Females?

ULIP NAV - Everything You Need to Know

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

Difference Between Passive and Active Investing

How to Fix the 9 Most Common Financial Problems Your Family is Facing

यूलिप प्लान में परिपक्वता लाभ क्या हैं: फंड वैल्यू सम एश्योर्ड या ओनली फंड वैल्यू?

Corporate Bonds: Meaning, Types & Benefits

What is a Bond Fund and How It Works?

Can You Have ULIP Plan and Health Insurance Plan Both?

5 Reasons to Have a Child Education Plan

Is Life Insurance Investment Worthy Enough

Why Do You Need A ULIP Plan - All You Need To Know

ULIP Benefits You Can Avail from Early Investing

What are the Best Investment Options for Students in India?

Top 11 Investment Plans Available in India

How Much Wealth Can You Create from ULIP in 10 years?

Planning For Son or Daughter's Wedding

उच्च रिटर्न प्राप्त करने के लिए सर्वश्रेष्ठ इन्वेस्टमेंट विकल्प

ULIP Investment Benefits You Must Know

ULIP Capital Gain Tax: Check Tax Norms for Capital Gain on ULIPs

Benefits of ULIP as a Child Insurance Plan

How to Use Recurring Investment Strategies to Build Wealth?

5 Best Long Term Investments To Add To Your Portfolio in 2023

What Happens If I Stop Paying My ULIP Policy Premium After Paying the First Premium? Will I Still Get The Return?

Long Term Savings Plan - Best Savings Investment Plans in India

8 Charges in ULIP That You Must Know

How is the Compound Annual Growth Rate (CAGR) Calculated in ULIP?

First Job? Here are Some Tips on How to Manage Finances

How To Track ULIP Performance?

How Is ULIP Different from Other Life Insurance Plans? Where Can I Invest - ELSS, ULIP, or PPF?

How to Start Saving Money in 10 Simple Ways?

All you need to know about Fund Switching in ULIPs

Difference Between Linked and Non-Linked Insurance Plans

How has ULIP Grown Over the Last 3 years?

What is ULIP and Its Benefits?

यूलिप और उनके प्रकार क्या हैं?

How Can a Legal Nominee Claim ULIP Benefits are the Policyholder’s Death?

What is Partial Withdrawal in ULIPs?

ULIP As An Investment Option For Senior Citizens

Which is Better – FD, Mutual Fund, SIP, or ULIP?

FAQs on Taxation of ULIPs

Planning Financial Goals and Objectives of Financial Planning

Balancing Investment Between Risk and Return on Investments

How Do One-Time Investment Plans Work?

What is the Time Value of Money (TVM)?

What are the Advantages and Disadvantages of ULIP?

What are the Minimum and Maximum Investments in ULIP?

What Is Financial Planning?

Why ULIP Should Be a Part of Your Investment Portfolio?

ULIP vs FD - Which is Better and Why?

Rate of Interest on Different Investment Plans in India

All you need to know about claiming maturity proceeds from Ulip

How to Set Financial Goals for Your Future

What are the Best Investment Options for Beginners or Amateur Investors in India?

What are the Best Short-Term Investment Plans with High Returns?

Safe Investment Options with High Returns for FY 2018-19

Will AI be Your Future Financial Adviser? What Role Will Humans Play?

ULIP Plans Riders You Should Know About

What is Fund Switch in ULIP? And ULIP Fund Switching Techniques

Investment Options for NRIs in India

Does Rupee Cost Averaging Work In Unit-Linked Insurance Plans?

What is Direct Investment and its Types?

Can ULIP Policy be Transferred?

How to Make Your Financial Portfolio?

What is a Savings Plan and What are is Benefits?

Debt ULIPs vs. Debt Mutual Funds: What's the Difference?

What is Equity Mutual Funds: Meaning, Types & Benefits

Which is a Better Investment - Mutual Funds Or ULIP?

Understanding ULIP Risks: What are the Odds of Losing all my Money and Projected Returns?

Asset Allocations in ULIP - Know the Top Benefits

Planning For Children's Future

Best Investment Options in India in 2022

How Much Wealth Can You Create From ULIP in 10 years?

5 Reasons to Buy ULIPS for a Financially Secured Future

Learn About Safe Investments with High Returns in India

Which are the Best ULIP Plans in India for Children?

Know How to Invest at Every Age for Larger Returns

8 Important Tips to Maximize Gains with ULIP Investments

Is the surrender value of ULIP taxable?

What is ULIP Renewal?

Creating a second source of income with life insurance

How and when should you exit from bad-performing ULIP?

What's Better for Your Child's Education? Child Plans or Mutual Funds?

Endowment Plan vs Fixed Deposit?

What is Premium Redirection in ULIPs Plans | ULIP Insurance Plans | Kotak Life Insurance

ULIPs Investment – A Boon or Bane?

What are ULIPs and their Types?

Why Are ULIPs Called Flexible Investments?

Do You Know the Difference Between Savings and Investment?

What is Compound Interest, And How Do I Calculate it?

Why is Portfolio Diversification Important? How to Diversify Your Portfolio?