Can I Withdraw ULIP After 5 Years?

ULIPs can be thought of as handy financial tools that can be utilized to bridge the gap between various investment possibilities while also providing considerable tax benefits. Life insurance products, such as ULIPs, are a more solid long-term wealth creation solution since they integrate returns, protection, and tax savings into one product.

ULIPs enable the investment of one's premium in a combination of debt and equity funds in various amounts, as well as inter-fund transfers via switches, all without incurring any tax penalty. A unit-linked insurance plan (ULIP plan) is a type of insurance plan in which the premium is invested in stock, debt, or money market assets.

Things To Consider Before Withdrawing ULIP

Here are few things to consider before withdrawing ULIP:

1. The Effect On Fund Values

Ulips has a lot of charges that are heavily font-loaded. In the first five years of the policy, these charges are further amortized. Within five years, the NAV-to-NAV return for any given Ulip fund maybe around 9% (yearly return). This, however, may not be reflected in the fund's value. The other charges are the cause of this. With time, the influence or effect of these charges reduces, particularly after the fifth year. In order to recoup the investment, you'll need numerous stock market upswings.

Also read - Is Ulip A Good Investment?

2. No Loyalty Bonuses Are Given To You

It is not a prudent decision to leave a ULIP soon after the lock-in term (5 years) has ended. Another thing to keep in mind is that the first five years account for the majority of the total charges. Furthermore, if the fund's value rises, exiting at that point will be unjustifiable. Furthermore, if you do not remain invested until the policy matures, you will not receive any loyalty increases, which are paid out along with the maturity benefit (fund value) at the policy's end.

3. Performance Of The Fund

The sole risk with ULIPs is the performance of the funds. It is possible that the fund will not perform as predicted. Exiting such a situation is quite costly. If you buy a complete equity-oriented Ulip scheme, your returns are likely to be modest in the event of a market downturn. If the markets performed well, it is recommended to look at the performance of the schemes. It is recommended that you do not exit the plan during its bull phase, which is when the scheme is performing well. To reap the revitalized rewards, you must stick to the plan. You can keep your ULIP's cap fund choice.

Conclusion

Those who have already purchased a ULIP should attach it to their long-term objectives and keep it until it matures. The maximum effect of all charges considered in a ULIP over 15 years is 2.23 percent. ULIPs are designed for long-term goals of at least ten years, and they provide both transparency and flexibility. Partial withdrawals are also available for liquidity. So, if you want a high return on your insurance policy, purchase a ULIP and be sure to keep it invested for the duration of the policy.

You may also like to read - Can I Stop A ULIP?

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.