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

Once you stop paying your recurring premiums, after a certain period, your policy gets discontinued. Know more about discontinuing your ULIP policy here.

  • 12,246 Views | Updated on: Jan 05, 2024

The present economic situation has demonstrated the need of beginning to plan your financial future far in advance by fully identifying your short and long-term financial goals, as well as the type of lifestyle you foresee for yourself and your loved ones. Since financial planning is such an important part of our lives, it’s important to pay attention to the investing component of it as well. Financial gurus advise investing a percentage of your monthly income in a lucrative financial instrument to increase assets and wealth.

A ULIP plan is one of the most popular investment options, and a lot is known about ULIP policy and its one of a kind features. A Unit-Linked Insurance Plan or ULIP is a combined policy that integrates investment and insurance perks into a single package. It is a type of life insurance plan that offers the policyholder risk protection as well as investing choices. Bonds, mutual funds, and equities are some of the assets that policyholders can invest in. If you are considering investing in a ULIP, it is vital that you understand the basics first.

A ULIP plan has a 5-year lock-in term, and in order to reap the benefits of this unique plan, you must commit to it for the long haul. You can choose to pay a monthly insurance ULIP premium or choose a single premium ULIP plan based on your financial objectives and budget. One popular question that people frequently ask for a variety of reasons ranging from financial instability to a change in personal goals is - what happens if they stop paying their ULIP premium?

We’ll guide you through what happens if you make the decision of discontinuing your ULIP insurance during the lock-in period in this article.

Discontinuing ULIP Policy Within The Lock-In Period

After the grace period expires, if the policy is not renewed due to non-payment of premiums during the five-year lock-in period, it will be switched to a “Discontinued Life Policy,” and the life insurance coverage will be terminated with the fund value moved to the Discontinued Life Policy fund after the discontinuance charges are deducted. Nevertheless, revival is permitted for a period of three years following the date of the first unpaid ULIP premium.

The policyholder is duly notified that the life insurance might be revived by paying the required premium amount. If the policyholder does not choose to revive the plan during the revival term, it will continue to operate without risk coverage, and the money will be put in the discontinuance fund. The profits of the discontinuance fund will be given to the policyholder at the completion of the lock-in period, post which it will be terminated. You, as a policyholder, have the choice to relinquish the ULIP at any time, with profits payable at the completion of the lock-in term or the date of surrender. It is important to note if you stop paying the premium before one year has passed, you risk losing your whole investment.

To summarise, as an investor, you should constantly be on the lookout for the best single premium ULIP plan or monthly ULIP premium plan that fits your budget, financial goals, and personal needs. Although it is essential to understand that this field of investment needs a long-term commitment in order to get the most out of your money. Hence, only after conducting an extensive study about the financial instrument of your choice and developing a precise framework of your resources and requirements, should you make an investment.

- 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

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

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