Do ULIPs Allow Partial Withdrawal?

A Unit Linked Insurance Plan (ULIP) is an insurance policy that provides both life insurance and wealth growth, allowing you and your loved ones to realize their goals. You can withdraw a portion of your accrued fund value even before your policy expires, which is a unique feature of this plan. You can deal with a financial catastrophe without taking out high-interest loans or liquidating your possessions if you have this flexibility.
While ULIPs offer this distinct advantage, it is critical to comprehend the plan's characteristics and details in order to be better prepared.

Partial Withdrawal In ULIPs

Below are a few things about Partial Withdrawal in ULIPs:

1. What Is Partial Withdrawal And How Does It Work?

• Premium allocation: 
  When you invest in a ULIP, you must pay a set premium. The premium is split into two parts: one is used to provide coverage, while the other is invested in various capital market funds.
• Withdrawal of funds: 
  The portion of the premium that is invested is divided into units, each of which has a set value. ULIPs allow you to redeem some of your units and withdraw money equivalent to those units in the event of an emergency.

2. The Lock-in Period

A five-year lock-in period is included with every ULIP. This lock-in time serves an important purpose. At first, the value of your fund is low. Your fund's value begins to grow only after you've paid a few premiums. When considering a partial withdrawal, keep this in mind.

3. Withdrawals Before The Five-year Lock-in Period

Withdrawals made prior to the five-year lock-in term are not permitted.

Partially withdrawing funds before the five-year lock-in term expires is not a possibility. What if you intend to surrender or cancel the policy before the end of the five-year period? Only after the lock-in period has ended can you expect to get the funds.

4. Withdrawal Restrictions

You, the policyholder, have no set limit on how much you can withdraw. The important thing to remember here is to set aside enough money to assist cover the cost of the ULIP. It's not a good idea to withdraw too much money because it could result in the policy being canceled.

Withdrawal restrictions differ between assurers and policies. They differ depending on whether you purchase the ULIP online or in person. A typical ULIP may allow you to withdraw up to 10% of the total premium paid. The limit can be as high as 20% of the premium paid in some cases.

Some policies contain a withdrawal restriction based on the value of the money after the withdrawal. The fund's worth after withdrawal, for example, should be at least three times the annual premium. Another might seek a one-year premium post-withdrawal fund value. Some assurers even set a minimum amount that can be withdrawn.

The number of withdrawals you can make may also be limited. The number varies, once again, depending on the policy. If you exceed this limit, you may be charged an administrative fee for further withdrawals. In many circumstances, you can only make partial withdrawals after three-month intervals

Conclusion

In a moment of need, the partial withdrawal option of ULIPs can be a godsend. However, keep in mind that the ULIP provides life insurance and aids in the accumulation of a sizable nest egg. Any withdrawal will have an impact on the size of this fund. It may also reduce the amount of the death benefit that must be paid. So, if you want to get the most out of partial withdrawal, make sure you use it intelligently.

Also read - How to Compare & Buy ULIPs in India?

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.