Can I withdraw money from ULIP during the lock-in period?

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The new year is just around the corner, and many of you must have made some resolutions for 2020. Amongst all the fancy goals that we set, financial planning always takes a backseat. But 2020, is the year when you need to make it a priority to safeguard your family in case of uncertainty. If you’re looking for a combined plan that helps to secure your family financially and invest money, then ULIP is the best one to consider. Unit-linked investment plan or ULIP is a combined insurance and investment plan. It allows you to divide your premium so that one portion goes towards investment in equity or debt funds, and the other is used to safeguard your family in case of a medical emergency.

The investment plan is managed by expert fund managers who take the call by investing your money in the shares/bonds that would guarantee maximum returns. However, you also have the right to choose fund options in which you want to invest. It is best to opt for a longer lock-in period to reap benefits.

Features of ULIP:

  • Enjoy market-linked returns along with protection to your family
  • Have the flexibility to select from 11 fund options that compliment your budget
  • Could choose a policy term that may vary from 5 to 20 years
  • Avail tax benefits under Section 80C and Section 10(10D) of Income Tax Act, 1961

Benefits of investing in ULIP: 

Financial security:

ULIP guarantees you and your family financial security like any other life insurance. In the event of your unfortunate demise, the nominee will receive a sum assured, fund value and 105% of the premium paid.

Meet Long-term goals: 

ULIPs ensures a disciplined way of saving money in the form of a premium paid on a single, monthly, weekly, half-yearly or annual basis. The funds invested could bring in maximum returns, which in turn will help you to meet long-term goals such as your child’s education, marriage, or buying a new home.

Best plan for beginners: 

Investing in ULIP is considered one of the best wealth creation tools. Many people are choosing to invest in equity-linked saving schemes over fixed deposits as the premium starts from as low as Rs.1,000. The investment plan poses less risk due to its investor-friendly options such as low premium rates and fund management charges.

Varied fund options:  

Some insurance companies like HDFC Life gives you the flexibility to choose from a variety of fund options such as Equity Plus Fund, Diversified Equity Fund, Blue Chip Fund, Opportunities Fund, Balanced Fund, etc. You can select any ULIP from the available options as per your budget and needs.

Understanding the withdrawal of money from ULIP during the lock-in period

Under ULIP, the liquidity option is not granted until the policy completes five years of the lock-in period. Lump-sum partial withdrawal is acceptable only after completion of the fifth year of the plan.

In case of a medical emergency, you can withdraw money from your funds, provided the lock-in period has ended and the life assured is above 18 years old. However, if you still go ahead with liquidity option amid the policy lock-in period, the insurance company has the right to terminate your policy. In a year, you are eligible for four free partial withdrawals, post which insurance company begins to charge for each withdrawal request.

If you’re new to investments and are ready to take a little risk, ULIPs can be a good choice. Before going ahead, remember that the fund options are subject to market risks.

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