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ULIP Frequently Asked Questions (FAQ) - Kotak Life

Before buying a ULIP policy, there are a couple of questions you need to ask yourself such as what is ULIP, how does it work, when can the investment be withdrawn etc.?

  • 5,028 Views | Updated on: Jan 10, 2024

Before making any investment, it’s reasonable to be apprehensive about whether you’re making the right choice. However, with numerous options available, picking the one you feel is worth your money might be challenging.

In recent years, people have begun gravitating toward ULIP plans. However, since they’re so distinct from traditional investment instruments, it’s crucial to fully comprehend them before fully putting your hard-earned money into them.

This article will answer all of the questions you should ask yourself before buying ULIP insurance if you’re thinking about it.

  • What is ULIP, and How it Works?

ULIPs are one of the safest and most suitable investment plans for beginners. To understand how ULIP works, it is important to know that they have one-of-a-kind investing structure and a 5-year statutory lock-in term. They’re a hybrid product that combines the advantages of both investing and life insurance into a single package. The monthly payment from investors in a ULIP plan is split into two parts: the first half is used to pay for life insurance premiums, and the second part is used to invest in financial instruments of your choice, such as equity, debt, or balanced funds. It’s worth noting that market circumstances influence the performance of ULIP funds.

  • Are ULIP Plans Flexible?

Due to features like fund switching, top-up options, premium redistribution, partial withdrawal, and more, ULIP funds have become popular investment vehicles. However, most ULIPs have restrictions on how many times you may withdraw or swap money for free. So before purchasing this insurance plan, learn everything you can about how ULIP works when it comes to flexibility.

  • Can We Withdraw ULIP?

“Can I withdraw ULIP after 5 years?” is one of the most important questions to ask? Every ULIP, on the whole, has a 5-year lock-in duration. Therefore, you will only be able to get the funds collected after your ULIP investment has completed five years if you withdraw a portion amount or desire to take the total amount invested by relinquishing the policy entirely or discontinuing premium payments. Not only that but the maturity sum is transferred to a discontinuance fund, resulting in fees. You’ll also need to buy life insurance online because your ULIP policy is no longer valid.

  • Is Buying a ULIP Plan Aligned with Your Goals?

Ensure that ULIPs fit within your financial strategy before you buy one or inquire about how ULIP works. If you wish to earn big ULIP returns, you must keep your money invested in ULIP funds for a long period. In case of financial emergency, ULIPs allow you to access a portion of your funds. However, you may only do so once the initial five-year lock-in period has ended. As a result, after examining these criteria and determining whether or not the policy is acceptable for you, you must determine whether or not to invest in ULIPs.

After knowing the answers to these questions, you must try and understand how the ULIP plan works. Let apprehension take a back seat and make the best choice for yourself and your loved ones.

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

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