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TATA AIA Life Insurance Co. Ltd will send you updates on your policy, new products & services, insurance solutions or related information. Select here to opt-in. T&C apply.

What is the ULIP Lock-in Period?

ULIP policy lock-in period refers to the duration for which you are not allowed to withdraw your accumulated funds. It allows policyholders to stay invested for the long term, ensuring higher returns by tiding through the short-term market fluctuations.

ULIP, or Unit-Linked Insurance Plan, is one of the most popular life insurance covers that offers the benefits of both insurance and investment. It allows you to invest in various investment instruments to help you achieve your financial goals while providing you with life insurance coverage.

When purchasing a ULIP policy for the first time, you will come across the term “ULIP lock-in period” quite often. If you are wondering what it means, we have got you covered.
 

In this blog, we will discuss everything you need to know about the ULIP policy lock-in period.

What is the ULIP Lock-in Period?

As the name suggests, the ULIP lock-in period is the pre-specified time frame during which you are not allowed to withdraw your funds. Note that the minimum lock-in period for ULIP policies is 5 years. It means you can not withdraw your accumulated funds before completing five years of investment.

Significance of ULIP Lock-in Period

The lock-in period in insurance plays a very important role. It allows you to stay invested and generate higher profits. Below are the main benefits of the ULIP policy lock-in period
 

  • The Longer You Stay Invested, The Higher Returns2 You Earn

    Experienced investors from all over the world believe that investing for a longer term is the key to gaining higher returns2 from investment instruments.

    The five-year lock-in period in ULIP provides the fund manager with enough time to make investment strategies and implement them to churn better returns.

    This lock-in period prevents you from withdrawing funds again and again without giving them adequate time to grow.

  • Higher Charges During Initial Years

    When you purchase a ULIP policy, it comes with multiple charges. These include premium allocation charges, fund manager fees, mortality charges, policy administration fees, etc.

    Generally, these charges are higher during the first few years, which reduces the net returns in the initial period.

    After five years of lock-in period, these charges become lower, increasing your annual returns.
     

    While the ULIP lock-in period may sound like a foundation at first, it aims to help you generate higher returns.

Can You Cancel a ULIP Policy During Its Lock-in Period?

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.

Should You Exit Your ULIP Policy After its Lock-in Period?

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.

Final Thoughts

ULIPs are one of the highly sought-after investment options that offer investors the best of both worlds.

A ULIP policy not only allows you to generate good returns from your hard-earned money but also provides you with life insurance coverage that secures the financial future of your dependents.

As mentioned in the blog, ULIPs come with a lock-in period during which your investment stays locked for a period of a minimum of five years. You can not withdraw your money during this time.

That’s all about the ULIP lock-in period in insurance. We hope it helps you in making the right decision.

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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

Frequently Asked Questions

Is ULIP a good investment option?

Yes, investing in a ULIP policy is a smart decision for multiple reasons. First, it offers dual benefits by acting like an investment as well as an insurance product. Second, it is a long-term investment that helps you build a financial corpus for meeting your future financial goals.

How to check the surrender charge of my ULIP policy?

Different ULIP providers have different surrender charges for their policies. You can check the same for your policy in your policy documents. Alternatively, you can also confirm it from your provider.

Disclaimers

  • Insurance cover is available under the product.
  • The products are underwritten by Tata AIA Life Insurance Company Ltd.
  • The plans are not guaranteed issuance plans, and they will be subject to the Company’s underwriting and acceptance.
  • For more details on risk factors, terms and conditions, please read the sales brochure carefully before concluding a sale.
  • This blog is for information and illustrative purposes only and does not purport to any financial or investment services and does 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.
  • 2Market-linked returns are subject to market risks and terms & conditions of the product. The assumed rate of returns or illustrated amount may not be guaranteed and depends on market fluctuations.
  • ULIP:
    IN THIS POLICY, THE INVESTMENT RISK IN INVESTMENT PORTFOLIO IS BORNE BY THE POLICYHOLDER

    THE LINKED INSURANCE PRODUCT DO NOT OFFER ANY LIQUIDITY DURING THE FIRST FIVE YEARS OF THE CONTRACT. THE POLICY HOLDER WILL NOT BE ABLE TO SURRENDER/WITHDRAW THE MONIES INVESTED IN LINKED INSURANCE PRODUCTS COMPLETELY OR PARTIALLY TILL THE END OF THE FIFTH YEAR.

    Past performance is not indicative of future performance.

    All investments made by the Company are subject to market risks. The Company does not guarantee any assured returns. The investment income and price may go down as well as up depending on several factors influencing the market.

    Please make your own independent decision after consulting your financial or other professional advisor.