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

The beauty of ULIP is that you will still make enough returns in the long term even if the market crashes, as you have an insurance factor linked to the premiums that you are paying.

  • 3,302 Views | Updated on: Jan 10, 2024

Before you plan on investing in ULIPs, it is important to understand every small detail related to Unit Linked Insurance Plans (ULIP) properly. This will clear out most of the confusion that you must be having about it and will further help you in planning the amount of your ULIP Premium. At the same time, it will help you in selecting one of the best ULIP plans in India as per your financial requirement and investment goals. There is a lot of misinformation about ULIP Policy, ULIP performance, and ULIP as an investment option. One of the popularly asked questions related to ULIP policy is - What happens to the ULIP Premium already paid if the market crashes?

The reason behind people often asking this question is - “ULIP, as a market-linked insurance plan, deals with the daily ups and downs of the stock, bond, money, and other markets.” As the option of investment in different funds is totally on the user, so is the risk. Thus, you can opt for low-risk market products with the safety of insurance or try your luck in a high-risk environment. The beauty is that you will still make enough returns in the long term, as you have an insurance factor linked to the premiums that you are paying.

ULIP Definition

Unit Linked means that this insurance plan is linked with some market units or funds that the user gets to choose as per their discretion. Once you pay the premium of your ULIP plan, it is split into two parts. One part is invested towards insurance and the other goes towards investment. So, the best and simplest ULIP definition would be an insurance policy with the benefit of both insurance and investment.

Is it advised to discontinue ULIP policy?

To be honest, it is never advised to discontinue any policy, even if you are facing some loss until you believe that it is a total loss in the long term. The best benefit with ULIP is that you can switch between different funds that you have invested in as and when you want and as per the market trends. If you keep track and update your investment portfolio, there are minimal chances that the ULIP funds will disappoint you with the returns.

ULIP is a secure financial long-term investment. The insurance regulators already have in place the regulation for investors that caps the charges and net reductions in yield, leading to no or minimal impact on ULIP performance and returns in the long term. Even if the market crashes, you will not lose a huge amount in the long term if you invest wisely. Moreover, ULIP allows you partial withdrawal of your funds in case you need it. However, if you discontinue ULIP policy, you might face additional charges.

To conclude, it is advised that you do your research and choose the best ULIP plans in India, as per your requirements. Moreover, you can also look for it online. Some Online ULIP Plans may give you additional benefits. Once you have selected the plan, decide your ULIP premium for a long-term investment perspective and keep the investment stable. In addition to this, it is advised in the case of ULIP, to regularly update your portfolio as per market trends to gain maximum benefits!

- 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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