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Know About Partial Withdrawals From ULIPs

Published On Mar 21, 2022

ULIPs, or unit-linked insurance plans, are widely regarded as one of the most conservative financial instruments available today. They provide a one-of-a-kind combination of life insurance protection and wealth building through investment. The ability to make partial withdrawals from the accumulated fund value to satisfy a sudden need is one of the numerous advantages of ULIP investment. Once the lock-in period is over, you can make partial withdrawals. However, there are a few limitations to the adaptability that ULIPs bring.

Everything You Need To Know About Partial Withdrawals From ULIPs

Everything you need to know about partial withdrawals from ULIPs is listed below:

  • Partial Withdrawal Limits

In most circumstances, there is no limit on the amount of money you may withdraw from an active ULIP. However, it is advised that you should not misuse this service to the point that you do not have enough finances to cover the cost of the ULIP. Otherwise, the policy might be canceled. Depending on the assurer, partially withdrawing from a ULIPS insurance may have varying restrictions. Withdrawals of up to 10% of the total premium paid are normally permitted after the obligatory lock-in period has expired. Other limits may be imposed by the insurance company, such as a minimum withdrawal amount or a maximum number of partial withdrawals each year.

  • Partially Withdrawing Before the Lock-In Period Ends

In ULIPs, there is no opportunity for partial withdrawals before the five-year lock-in period expires. Even if you surrender or cancel the ULIP within the lock-in term, you won't collect your money until the five-year period is through (after deducting surrender and policy discontinuation expenses, as applicable). 

  • Making Partial Withdrawals After the Lock-In Period

As the policyholder, you can make partial withdrawals once the lock-in period expires. Before making any withdrawals from the accumulated cash, there are a few things to bear in mind. You can't take out the whole accrued sum before the policy's maturity date or without surrendering or terminating it. If you acquired a ULIP for your minor kid, once he or she becomes 18, he or she may only make partial withdrawals from the policy.

  • Life Insurance Effects of a Partial Withdrawal

You might be concerned about how withdrawals would affect your insurance coverage. Each partial withdrawal often affects the amount insured under your ULIP life insurance policy. If you withdraw more than two years before the policyholder's untimely death, there will be no effect on the sum insured. To understand how partial withdrawals operate for the plan coverage you've chosen, see the policy document.

  • Premiums must be paid on a Consistent Basis

To take advantage of the ULIP's many benefits, including the partial withdrawal option, you must always pay your premiums on time to keep the policy valid. If there are any gaps, suspensions, or conflicts in premium payment, the insurance company may prohibit additional partial withdrawals. You can utilize the ULIP funds to pursue your immediate life objectives without suffering any tax repercussions because the money released after the lock-in period is tax-free. To get the most out of your ULIP investment, keep to the maximum number of partial withdrawals allowed each year, as specified in your policy underwriting.

Take Away

ULIPs' partial withdrawal feature might come in handy in a pinch. Please recall, nonetheless, that possibly the ULIP provides financial security and assists in the building of large retirement savings. Any withdrawals will have an impact on the magnitude of that type of investment. It could also reduce the amount of money that has to be spent. If you want to get the most out of partial withdrawal, be certain that you use it wisely.

Also Read: Are you thinking about Purchasing A Unit-Linked Insurance Plan? Here Are Some Things You Should Know!

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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