Financial planning for a better future is one of the most essential things people have to consider sooner or later in their lives. It is advisable to invest in instruments that can help you grow your wealth to live a financially independent life in the future and meet the economic aspirations of your family.
As life is uncertain, having a life insurance plan is the need of the hour. If you wish to insure your life and simultaneously build a large corpus over time, you can consider investing in Unit-Linked Insurance Plans (ULIPs).
If you are eager to know about the ULIP meaning, then let us explain it to you in a simpler way. ULIP is a type of life insurance plan, which offers the dual benefits of insurance and investment. The insurer uses part of your premium investing in equity, debt, or a combination of funds as per your risk-taking capability. Moreover, if you stay invested for a long period of approximately 15 years, you earn attractive ULIP returns, as you reap the benefits of the power of compounding. All these aspects make ULIP a noteworthy investment avenue.
ULIP offers numerous benefits and one of the most important ones among them is the facility of partial withdrawal. However, this advantage comes with specific conditions, which are explained here:
- Withdrawal limit
The withdrawal limit varies among insurers. It also differs according to the mode of purchasing the policy, whether you have invested in it offline or online. The standard limit on withdrawals is around 10 percent of the aggregate premium paid to date. However, many policies offer withdrawal of up to 20 percent of the total cost incurred on premiums to date. You can do a partial withdrawal only after the five-year mandatory lock-in period ends.
Certain ULIPs have restrictions on withdrawals based on the value of the fund. Here, the value should be a minimum of three times more than the yearly premium. Conversely, some insurers have capped a limit on the amount of withdrawal. In some instances, insurers have imposed a restriction on the number of times you can withdraw the amount. In case if you exceed the limit of withdrawals, the insurer may charge you administration fees. Some insurers may let you withdraw money only on a quarterly basis. Therefore, learn about the insurer’s terms and conditions related to the partial withdrawal feature before buying a policy.
- Withdrawals before the lock-in duration
A ULIP investment comes with a five-year lock-in tenure. So, you cannot withdraw until this period is over. If you wish to surrender the policy, you will get the sum after the lock-in term ends.
- Withdrawals post the lock-in period
It is important that you know the regulations associated while withdrawing after the lock-in tenure. Here, the insurer will adjust your partial withdrawal amount from the top-up payments that you have made towards your policy. If you do not have any top-up amount, the insurer will adjust the withdrawal sum from the base value of the fund. If the insured is a minor, the insurer will not permit partial withdrawals until he or she becomes an adult.
- Partial withdrawal and sum assured
Many people are skeptical that their sum assured will be affected if they make a partial withdrawal. This is true if the withdrawal is done two years before the policyholder’s death. If the withdrawal is made more than two years prior to the policyholder’s demise, the sum assured is not affected.
ULIP investment is one of the best ways to ensure your family’s monetary security against the uncertainty of life and grow your wealth over time. ULIP returns are considerably higher than most of the financial instruments available in the market if you are investing from a long-term perspective. However, in case of any financial emergency, if you wish to withdraw money from your ULIP investment, do check the insurer’s norms associated with partial withdrawals and then make an informed decision.