Is Partial Withdrawal Allowed in ULIP?

ULIP plans allow for partial withdrawals for situations arising at different life stages and needs, such as your children’s higher education, critical illness, purchase of a new building or property, children’s marriage, etc. The regulating body for ULIPs, the Insurance Regulatory and Development Authority of India (IRDAI), came out with a set of new guidelines for life insurance companies in February 2020. Before these new guidelines, the limit of withdrawals and other technicalities varied, depending on the insurer. However, now such details are standardized.

When Can We Withdraw from ULIP?

According to the new rules, the policyholder can make partial withdrawals thrice from their ULIP funds after the lock-in period ends. This means that the partial withdrawal facility is available three times during the entire term of the ULIP policy. It is also important to note that the policyholder must be at least 18 years of age to make partial withdrawals.

Term Insurance AWARD WINNING

Investment Plans

NRI Plans

All Plans

Customer Service

Calculators

Fund Performance

Need assistance in choosing the right insurance plan?

Need assistance in choosing the right insurance plan?Get a call from our Expert.

Are you an NRI?

Yes

Name

Mobile number

+91

What Should You Know About Partial Withdrawal From ULIPs?

Q: What Should You Know About Partial Withdrawal From ULIPs?

A Unit Linked Life Insurance Plan (ULIP) is a good insurance investment option to consider for your portfolio. It combines the benefits of two different financial products—life insurance and wealth creation investments. A ULIP plan allocates a portion of the premium paid by the policyholder as the premium for the life insurance policy, and the remaining is invested in a fund of the policyholder’s choice to meet their financial goals. From a long-term perspective, a ULIP policy is a prudent policy because it also enables tax* savings in addition to the dual benefits. ULIPs offer other advantages such as partial withdrawals. The partial withdrawal option comes in handy when you unexpectedly need a chunk of money. But it is important to understand how partial withdrawals work in ULIPs, and how to opt for them wisely when required.

Q: What is the Lock-in Period for ULIP?

Partial withdrawals in ULIP are possible only after the lock-in period of your policy ends. The maturity period of your ULIP policy may be 20 or 30 years. However, the lock-in period for all ULIP plans is five years. This lock-in period is related to the money invested in funds. The lock-in period is devised to boost your fund value. Typically, your fund value begins to rise only after you pay the initial few premiums on your ULIP policy. Also, the longer your investment horizon, the better it is for your returns and for hedging market risks.

Q: Is it Possible to Withdraw Funds Before the Lock-in Period?

You cannot make partial withdrawals during the lock-in period of five years. There’s no way around it. Even if you choose to surrender your ULIP policy or discontinue it, you still won’t be able to access your money until the end of the lock-in period. When you surrender your ULIP plan, the risk cover will cease to exist, but you still will have to wait to receive the money. It is also essential to note that the partial withdrawal facility is only available to those who have paid all the premiums due, and the ULIP policy is in force.

Q: How Much Amount is Allowed for Partial Withdrawals?

When partially withdrawing from your ULIP plan, you can withdraw either ₹ 1,000 or ₹ 2,000 as the minimum amount, depending on your policy. As for the maximum limit, it is around 25% of your fund’s value at the time of withdrawal. This is subject to the condition that at least one year’s premium remains in the fund. For instance, say a policyholder bought a ULIP policy, which after the lock-in period of five years has a fund value of ₹ 3 Lakh. The annual premium is ₹ 50,000, and the sum assured is ₹ 6 Lakh. 25% of the fund value, in this case, amounts to ₹ 75,000. On withdrawing ₹ 75,000, because the amount equal to one year’s premium (₹ 50,000) remains in the fund, it is possible to make a partial withdrawal for ₹ 75,000.

Q: What is the Impact on the Sum Assured?

When you withdraw from your ULIP fund, not only does the fund value decrease by that amount but also the sum assured. However, this reduction in the sum assured is only for a period of two years. At the end of the two years, the sum assured will automatically be restored to the original amount. So in the long term, making a partial withdrawal will not have a negative impact on your ULIP policy. It is important to remember that this automatic restoration of the sum assured is only possible if you don’t make any additional withdrawals within the two-year period. Another requirement is that you continue paying the premiums due. Hence, the only situation in which making a partial withdrawal in ULIP will have a lasting impact is if the policyholder passes away during the two-year period after the withdrawal. In that case, the reduced sum assured will be paid to the nominee

dd MMM yyyy1784869506491 - 9

Partial Withdrawal in ULIP allows policyholders to withdraw a portion of their accumulated fund value without surrendering the policy. This facility can be used for various financial needs in order to maintain the policy, whether they are anticipated or unforeseen. But ULIP Withdrawal rules outline the circumstances of making a withdrawal, how much is allowed to be taken out and when it can be made. Knowing the details of partial withdrawal from ULIP can help you to take better decisions without compromising on your long-term financial goal.

Can you make a partial withdrawal from a ULIP before maturity?

Yes, a partial withdrawal can be done before the maturity of a ULIP policy, as long as the eligibility criteria are fulfilled.

Key points to know:

The partial withdrawals are typically only permitted after the agreed lock-in period.
The policy will continue to operate even if the amount of fund value is deducted.
All insurers can prescribe a minimum amount to be withdrawn and the number of times per year.
Please verify applicable ULIP rules before requesting a withdrawal.

When can you withdraw money from a ULIP?

Partial Withdrawal from ULIP can be allowed after 5 years of lock-in. After being eligible, policyholders are able to withdraw their funds in accordance with the terms of the policy and remain to enjoy the remaining benefits of the investment and life insurance.

What is the lock-in period for ULIPs?

There is a lock-in period of 5 years from the policy date in case of ULIP. In this time, withdrawals can't be made, which helps promote long-term investing habits and ensures that the person is still insured.

Is it possible to withdraw funds before the lock-in period?

No, partial withdrawals are not permitted in the first five-year lock-in period as per the normal ULIP withdrawal rules. Generally, proceeds are released only when the policy lock in period.

How much amount is allowed for partial withdrawals?

Partial withdrawal limits vary in different ULIP plans and policies. In most policies, the policyholder can only withdraw a certain percentage of the amount in his fund as long as the policy minimum requirement is met. The exact limit is mentioned in the policy document.

What is the impact on the sum assured?

A ULIP Partial Withdrawal may affect the policy benefits depending on the policy terms. In some plans, the sum assured remains unchanged, while in others, withdrawals may reduce the payable death benefit or the available fund value. It is important to understand the policy conditions before making a withdrawal.

Conclusion

What is Partial Withdrawal in ULIP? It is a facility that enables policyholders to access a portion of their investment after the lock-in period without closing the policy. Understanding the eligibility criteria, ULIP Withdrawal Rules, and the ULIP partial withdrawal limit can help you use this feature wisely while staying aligned with your long-term financial objectives.

Tata AIA Life Insurance

A joint venture between Tata Sons Pvt. Ltd. and AIA Group Ltd. (AIA), Tata AIA Life Insurance is one of the leading life insurance providers in India. We post everything you need to know about life insurance, tax savings and a variety of lateral topics such as savings and investments in this space. You can access and read a host of different blogs, articles and pages at the Tata AIA Life Insurance Knowledge Center or get in touch with us with any queries or questions!

View all posts by Tata AIA Life Insurance

Key Takeaways

Partial withdrawals allow you to access a portion of your ULIP fund after the five-year lock-in period without closing the policy.
Withdrawals reduce the fund value and may affect future growth or life cover, depending on the policy’s limits and terms.

Need assistance in choosing the right insurance plan?

Get Flexibility to Choose from 10+ Fund Options with our ULIP

Are you an NRI?

Yes

Name

Mobile number

+91

Plan

Looking to buy a new insurance plan?

Our experts are happy to help you!

Are you an NRI?

Yes

Are you an NRI?

Yes

Name

Plan

Are there any charges for Partial Withdrawals in ULIP?

Some insurers may offer a limited number of free partial withdrawals, while additional withdrawals may attract charges as specified in the policy terms.

What is the impact of partial withdrawals on my investment and life insurance coverage?

Partial withdrawals reduce the fund value and may also affect the death benefit or life insurance cover, depending on your ULIP's terms and conditions.

What happens if I withdraw more than the permissible limit from my ULIP?

You cannot withdraw more than the limit allowed under your policy, and any request exceeding the permissible amount is generally declined by the insurer.

Is there a limit to how much I can withdraw from my ULIP?

Yes, the withdrawal amount is subject to the ULIP partial withdrawal limit specified by your insurer and the available fund value.

Can I continue investing in my ULIP after making a partial withdrawal?

Yes, you can continue paying premiums and remain invested in your ULIP after making an eligible partial withdrawal, provided the policy remains active.

Does a partial withdrawal affect future fund growth in a ULIP?

Yes, since a partial withdrawal reduces the invested fund value, the future growth potential of your ULIP may also be lower.

This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.
Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.
Every effort is made to ensure that all information contained in this blog is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.