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What is ULIP Renewal?

Investing in ULIPs, but not sure how to plan ahead after the policy term ends? Read ahead to know more.

  • 4,894 Views | Updated on: Dec 07, 2023

Updated on: 29 June 2023

Years have passed, and your ULIP has not only safeguarded your loved ones’ future but also grown your investment manifold. However, as the policy term nears its end, you find yourself at a crossroads, facing a crucial decision that could impact your financial aspirations.

    Key Takeaways

  • ULIPs offer life insurance coverage and investment growth potential.
  • Renewing a ULIP policy ensures that you continue to receive these benefits.
  • There are several methods for renewing your ULIP, including online and offline payments.
  • It is important to pay your renewal premium on time to avoid additional fees.

Imagine this scenario: You’ve invested your hard-earned money in a Unit Linked Insurance Plan (ULIP). This financial tool promises the dual benefits of insurance coverage and potential wealth creation. But what to do when the policy term ends?

Let this blog guide you through the ways ULIP works, the significance of policy renewal, and methods for renewing it.

What is ULIP and How Does It Work?

ULIP, or a Unit Linked Insurance Plan, is a dual benefit plan offering policyholder financial security and providing life security. It combines life insurance with investment. When you buy a ULIP, you pay a premium that is divided into two parts:

Life insurance component

This part of the premium is used to provide you with life insurance coverage. The coverage amount you receive will depend on the terms of your policy.

Investment component

This part of the premium is invested in a variety of funds, such as equity funds, debt funds, and hybrid funds. The performance of these funds will determine the growth of your investment.

ULIPs offer a number of benefits, including:

Life Insurance Coverage

ULIPs provide you with life insurance coverage. This means in the case of demise during the duration of your policy, your beneficiaries will receive a death benefit.

Investment Growth

The investment component of your ULIP can grow over time, depending on the performance of the funds you choose. This can help you save for your retirement or other long-term goals.

What is the Meaning of Renewing a ULIP?

Renewing a ULIP refers to the process of continuing the policy for an additional period after the initial policy term expires. When a ULIP policy term comes to an end, the policyholder has the option to renew the policy for another term, usually by paying the renewal premium. This allows the policyholder to continue the insurance coverage and investment benefits offered by the policy for an extended period.

During the renewal process, the policyholder can have the opportunity to make changes to their investment strategy, such as switching between funds or adjusting the allocation of funds. They can also review the sum assured, premium amount, and other policy features to ensure they align with their financial goals.

Significance of Renewing a ULIP Policy

Renewing the policy at the right time is essential for several reasons, as failing to do so can affect your financial plan adversely. Here are some factors that emphasize the importance of ULIP renewal:

Ensures that the Policyholder Reaps Benefits in Long Run

ULIPs offer the policyholder a protective life covers to protect them and their family during any unfortunate incident. Apart from this, ULIPs also offer investment opportunities that help the policyholder with capital appreciation. By renewing your policy timely, you can continue to enjoy these benefits in the long run and keep your financial safety net intact.

Helps to Keep Life Goals on Track

The inability to pay the renewal amount on time can lead to extra charges or discontinuation of the policy, which automatically leaves you with no investment to rely on or no insurance. Therefore, it is crucial to get your ULIP renewed on time.

Enjoy the Tax Benefits

ULIPs offer tax benefits to the policyholder. As per Section 80C of the Income Tax Act, 1961, the premium paid is deductible from your total income for that year. This reduces your taxable income and, in consequence, your tax liability. Renewing your policy will help ensure you enjoy the tax deduction benefits.

Methods for Renewing Your ULIP

It is essential to pay the ULIP premium on time because a late payment may result in additional fees that reduce the benefits of the plan. After the policy has completed its tenure it is needed to be renewed. You can renew your ULIP in a variety of ways by paying the premium. The premium can either be paid online or offline mode. In addition, there are several options available for you to get your policy renewed.

Cheque Payment

Paying the ULIP renewal amount via cheque is one of the most conventional offline modes. You can either drop the renewal amount cheque in the drop box of your insurance branch, or you can submit your cheque at the Insurer’s office.

ATM Payments

It is another offline ULIP renewal mode. The policyholders can pay their renewal premium through bank ATMs that the banking partner supports.

Bank’s Auto-Debit Facility

It is an easy way of paying the premium amount without missing any premium payment. In addition, you can activate the auto-debit facility on your bank account or Credit card, from which the amount would be automatically each time your payment is due.

Online Payment

To enjoy the benefits of ULIP, you can opt to pay for online premium payments. To begin with this, you need to register on your Insurer’s web portal. Afterward, you can go online and make the premium payment using your Internet banking portal or credit card. The customer can alternatively pay renewal premiums through third-party mobile applications like. You can prefer to pay the renewal amount via third-party applications such as UPI, PayTM, Google Pay, PhonePe, and Amazon Pay.

Things to Consider for Online ULIP Renewal

After completion of policy duration, renewal seems like the next step if you do not need the policy amount for any other expense. A policyholder must consider the following things while opting for only ULIP Renewal:

  • Know the amount of your premium and the due date. For you to complete the necessary tasks on time, businesses typically send payment reminders to your registered mobile number or email address.
  • Verify that you have enough money in your bank account or credit card to complete the transaction.
  • You could also renew your ULIP swiftly using this technique if your bank accepts mobile payments.

Things to Consider While Offline ULIP Renewal

When it comes to the offline renewal of Unit Linked Insurance Plans (ULIPs), there are several important factors to consider. Here are some things to consider while renewing your ULIP offline:

Due date

It is important to be sure of the due date. Make sure to renew your policy before the due date, as failing to do so could result in your policy lapsing.

Renewal Premium

The premium will be based on your current fund value and the premium paying term. You can find the renewal premium in your policy documents or by contacting your insurer.

Payment Method

You can pay your renewal premium by cheque, demand draft, or cash. If you’re paying by cheque, make sure to write your policy number and contact information on the back of the cheque.

Payment Submission

You can submit your policy payment at your insurer’s branch, by mail, or at an authorized bank partner collection center.

Payment Status

After you’ve submitted your payment, you can check the status by contacting your insurer or by logging into your online account.

Conclusion

ULIP renewal plays an important role in ensuring the long-term growth and financial security of policyholders. By renewing their ULIP policies, individuals can continue to harness the power of market-linked investments while safeguarding their loved ones’ futures. With the ability to adapt to changing financial goals and market conditions, ULIP renewal serves as a valuable tool for wealth creation, protection, and overall financial well-being. Embracing ULIP renewal empowers individuals to stay on track toward their desired financial outcomes, making it a prudent choice for those seeking a comprehensive and dynamic approach to financial planning.

FAQS

1

Is ULIP good for long-term investment?

Yes, ULIP can be a good option for long-term investments. Still, it is important to choose a plan with low fees and a lock-in period that you are comfortable with. Always consider a plan that invests in funds that are appropriate for your risk tolerance.



2

Can I surrender my ULIP before the lock-in period without penalty?

No, you cannot surrender your ULIP before the lock-in period without penalty. The lock-in period is a period of time during which you cannot surrender your policy without incurring a penalty. The penalty is usually a percentage of the surrender value of your policy. The lock-in period is typically 5 years, but it can be shorter or longer depending on the plan.



3

What happens if I die before the lock-in period?

If you die before the lock-in period, your beneficiaries will have the death benefit of your policy. The death benefit will be reduced by the amount of the surrender penalty.

  • The sum that will be assured
  • Fees for the premium
  • Senior citizen’s age


4

Can I change my investment options in my ULIP?

Yes, you can change your investment options in your ULIP. However, there may be a charge for doing so. The charge is usually a percentage of the amount that you are changing. You can change your investment options as often as you like, but you should make sure that you understand the fees involved before you do so.

5

What happens if I miss a premium payment?

If you miss a premium payment, your policy will lapse. This means that you will lose the money that you have already invested in the policy. You may be able to reinstate your policy, but you will have to pay a reinstatement fee. The reinstatement fee is usually a percentage of the premium that you missed.

6

What is the difference between a ULIP and a traditional life insurance plan?

The main difference between a ULIP and a traditional life insurance plan is that a ULIP also offers investment options. A traditional life insurance plan only provides life insurance coverage. This means in case of your demise, your beneficiaries will receive a death benefit. However, you will not receive any investment returns.

- 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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