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In this policy, the investment risk in the investment portfolio is borne by the policyholder.
Kotak e-Invest
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Ref. No. KLI/22-23/E-BB/492
The lock in period for ULIP is a five-year timeframe during which you cannot withdraw your investment. If you surrender your ULIP before this period ends, the funds are transferred to a discontinued policy fund and held until the lock in period concludes. After the lock in period ends, many ULIPs permit partial withdrawals, either unlimited or within set limits.
ULIPs, or Unit-Linked Insurance Plans, combine the benefits of life insurance and market-linked returns into a single package. They have a standard lock in period of five years, during which you cannot withdraw your funds. Some ULIP plans can allow partial withdrawal after three years but impose surrender fees for the same. However, after the lock in period has expired, you can access your funds without penalty.
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. However, most withdrawals are subject to costs depending on the plan bought.
It is now clear that you cannot withdraw your ULIP funds before five years without a penalty. But what happens if you terminate the plan during this period?
See, if you surrender a ULIP before the five-year lock in period ends, the value of your funds is moved to a Discontinued Policies fund (DP fund). Surrender or discontinuance charges may apply as per the policy terms.
The funds are only returned to you after the lock in period concludes. Until then, the money in the DP fund earns a minimum of 4% interest. This rate may vary depending on regulatory guidelines.
In the unfortunate event of your demise during the locking period of ULIP plan, the DP fund amount is paid to the nominee. Once the lock in period ends, if you choose to surrender the policy, the fund value is refunded at the prevailing ULIP NAV (Net Asset Value), and no cancellation fees are charged.
Though you can withdraw funds from the ULIP policy after the lock in period of 5 years, this may not be the best decision.
First of all, you will lose out on the compounding benefits that help your investment grow over time. While the funds received can help you meet your short-term needs, you can end up compromising on your long-term financial goals like retirement planning, funding a child’s education, or creating wealth. Many individuals even opt for ULIP renewal to extend their ULIP investments beyond the policy term and benefit from market growth.
Further, there is one more thing you should know about how ULIP works. That is, when you exit from the ULIP policy, you receive funds after deducting charges, such as premium allocation and policy administration fees. As these charges are higher in the initial years of a ULIP, you will receive lower returns if you exit early.
Tax benefits under Section 80C and tax-free maturity proceeds under Section 10(10D) of the Income Tax Act 1961 are other reasons to continue with your ULIP. Exiting early can mean losing out on these benefits of ULIP.
If you are looking for security as well as excellent investment returns, then ULIPs are a great choice. You can also compare different plans like ULIP vs mutual funds and select the one that suits your specific circumstances, like buying the ULIP retirement plan for post-retirement needs. 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.
1
The lock in period for a Unit-Linked Insurance Plan (ULIP) is the minimum time during which you cannot withdraw your funds. In India, this period is five years from the date the policy is issued.
2
The lock in period for ULIPs in India is typically five years. This means you must wait at least five years before accessing your invested funds.
3
The lock in period ensures disciplined, long-term savings and allows your investment to grow over time. It also helps insurers cover the costs of issuing the policy and managing the funds.
4
No, you cannot make withdrawals during the lock in period. However, after the lock in period ends, you can access your funds as per the policy terms.
5
If you surrender your ULIP before the lock in period ends, the insurer deducts surrender charges and holds the remaining funds until the lock in period is over. You will only receive the payout after the five-year period.
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.
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.
Kotak e-Invest
Features
Ref. No. KLI/22-23/E-BB/521
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The content has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Further customer is the advised to go through the sales brochure before conducting any sale. Above illustrations are only for understanding, it is not directly or indirectly related to the performance of any product or plans of Kotak Life.
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