What is the ULIP Lock-in Period?

The following points explain how the ULIP lock in period works.

• The lock-in starts from the policy commencement date

  The five-year lock-in period begins from the policy commencement date after the first premium payment.

• Investments remain in the selected funds

  The invested amount continues to remain in the chosen market-linked funds throughout the lock-in period.

• Fund switching is generally available

  Most ULIPs allow policyholders to switch between available investment funds during the lock-in period, subject to the policy terms.

• Withdrawals are allowed after five years

  Partial withdrawals are generally permitted only after completing the mandatory five-year lock-in period and meeting the policy conditions.

• Longer investment supports wealth creation

  Remaining invested for a longer period gives investments greater opportunity to benefit from compounding and market growth.

As mentioned earlier, you can not withdraw your accumulated ULIP funds during its lock-in period. However, if you are facing a financial burden or the ULIP policy is not aligning with your goals, you can choose to cancel or surrender it.
Here is what happens when you cancel your ULIP policy during its lock-in period of five or more years:

• You need to pay the surrender charges levied by your insurance provider. These are the charges for cancelling the policy during its lock-in time frame.

• You may cancel your ULIP policy during its lock-in period. However, your money will only be returned after the completion of five years.

• Your fund value will be transferred to a different account known as a DP fund.

• After the end of your lock-in period, the total money will be transferred to your linked bank account.

ULIPs are considered reliable long-term investment options that help you reap desired returns after some years of investment.

As mentioned above, during the initial years of investment, the policy management charges of ULIP are very high, which tends to reduce the overall profits. However, once the policy completes its lock-in period, these charges start decreasing, and your investments finally start generating better returns.

While it can be intimidating to withdraw your accumulated ULIP fund as soon as your policy completes its lock-in frame, it is advised to stay invested to earn desired returns.

ULIPs and other long-term investment policies work on the “purchase and forget” rule. It means to reap the most benefits; you should forget about them for a few years after parking your money in them.

In essence, if you want to gain better returns from your investment in a ULIP policy, stay invested even after the lock-in period.