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Minimum Lock in Period for ULIP

A minimum lock-in period of five-year is standard for ULIPs. But here are some key aspects of the ULIP Lock-in Period that you should be aware of.

  • 7,494 Views | Updated on: Dec 12, 2023

The number of people entering the investment world has risen at an unprecedented rate. As they become increasingly conscious that a strong financial portfolio includes a combination of savings, income, and investment, they have begun to gravitate toward investment options that generate high returns and drive asset growth. As a result, ULIP fund investments have been on the rise, and if you have or want to participate in a ULIP program, what is the minimum lock-in period for ULIP can be a topic of conversation.

All About the Minimum ULIP Lock-in Period

ULIPs, or Unit-Linked Insurance Plans, are unique as they combine investing and insurance into a single package. This life insurance policy is typically the most balanced and sought-after plan because it combines financial security, market investment, and tax savings. The period during which you cannot withdraw your ULIP investment is known as the lock-in period. A minimum lock-in period of five-year is standard for ULIPs. Surrender costs must be paid if you intend to withdraw your investment before the lock-in period expires. However, after the lock-in period has expired, you will be allowed to surrender the insurance without penalty. It’s best to avoid taking money out of ULIP accounts because they help you accomplish long-term financial goals.

Key Aspects of the ULIP Lock-in Period

  • Withdrawal Options in ULIPs

In most ULIPs, partial withdrawals are not permitted until the five-year lock-in term has expired. While some policies allow for unlimited partial withdrawals after the lock-in period, others allow policyholders to withdraw a set amount each month throughout the policy tenure. In addition, after three years of plan eligibility, some ULIP plans allow partial withdrawals. However, most withdrawals are subject to costs depending on the plan bought.

  • Surrendering or Discontinuing Before the ULIP Lock-In Period

What are lock-in periods in ULIPs?

The value of the ULIP funds is moved to a discontinued policies fund, usually referred to as the DP fund, if the ULIP is terminated or surrendered before the conclusion of the five years. Surrender or discontinuance expenses may be assessed according to the terms and conditions of the ULIP policy. Furthermore, the funds are only returned to the plan holder once the lock-in term is over. Until the lock-in term is expired, money in the DP fund earns a minimum of 4% interest. However, this interest rate may alter depending on the regulatory framework of the governing bodies. In addition, if the policyholder dies during the lock-in period of the ULIP, the DP fund amount is distributed to the nominee.

If a policyholder renounces their insurance after the lock-in period has expired, the fund value will be refunded at the current net asset value or NAV. In these circumstances, there are no cancellation fees.

If you are looking for security as well as excellent investment returns, then ULIPs are a great choice. However, you must be willing to commit to the plan for the long term to reap the most benefits. All you must do is master the fundamentals, understand the minimum lock-in period for ULIP, comprehend the terms and conditions, deductions, and exemptions, and make a well-informed conclusion.

- 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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