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Understanding The Concept Of Lock-In Period In ULIPs

Published On Dec 29, 2021 10:00 AM By InsuranceDekho

When it comes to making financial decisions, we frequently lean toward products with "more" features. ULIPs are a type of product that combines several benefits into a single investment. Individuals can use ULIPs to get insurance and invest at the same time. ULIPs allow investors to acquire the life insurance they want while still investing for their long-term financial goals. Simply put, ULIPs can provide investors with extra value. They also have the ability to move between investment programs during the premium payment process. Fund managers invest in debt or equity securities depending on the fund type. 

Understanding The Concept Of Lock-In Period In ULIPs

Below are things to know about the concept of the Lock-In Period In ULIPs:

1. Understanding The ULIP Lock-In Period

First and foremost, you must have a fundamental understanding of how some of India's best ULIP operate. To stay in force, they, like most insurance plans, require continuous premium payments. A portion of the premium is used to secure life insurance, while the rest is invested in the policyholder's choice of funds.

It may be an excellent investment for achieving long-term financial objectives. The finest ULIP plan in India provides protection for your loved ones while also allowing you to build wealth without having to worry about it. However, you should be aware of the lock-in time before purchasing the plan. A 5-year lock-in period applies to ULIP programs. It is the time frame during which the policyholder is unable to withdraw or liquidate the fund's value. Many people consider the lock-in time to be inconvenient, but it serves a purpose.

2. Stability

When choosing an investment for a market-linked product, you must be patient as a policyholder. If you abandon the insurance during the first few years, even the best ULIP in India would not deliver adequate benefits. Time offers your assets the stability to flourish and provide the most profit possible over time.

3. Favorable For Investors

Investors can become accustomed to stock market swings throughout the lock-in period. Small market swings cause most investors to fear, and they may decide to abandon the insurance early. It will just prevent you from making use of the funds' potential benefits for a longer length of time.

4. Surrender Or Discontinuance Charges

Furthermore, if you carefully select the best ULIP in India with the intention of terminating it before the lock-in period expires, you may wind up losing more money than necessary. In this circumstance, the fund's value is transferred to a discontinued policy (DP) fund set up for this type of situation. Surrender or discontinuance charges may also apply, depending on the insurance terms.

Until the conclusion of the lock-in period, the discontinued policy money earns at least 4% interest. The interest rate charged may change in accordance with the regulatory authority's guidelines. Only after the lock-in time has ended are you eligible to receive the money.

5. Be A Smart Investor

It is critical to analyse your ability to take risks and be patient while reviewing your financial options. If you are cautious, the top ULIPs in India may be a viable option. The lock-in period should not be viewed as a hindrance but rather as a benefit to investors.

Even when you invest in the greatest ULIP in India, building wealth takes time and perseverance. Every hardworking individual strives to get the most out of their earnings. It is advantageous to diversify your investment portfolio for this purpose. While doing so, keep in mind to choose a reputable insurance company to avoid any future regrets.


A ULIP allows an investor to choose funds based on their long-term financial goals and distribute money between equity and debt funds accordingly. By investing in ULIPs, investors will have life insurance coverage for the duration of the policy.

Also read - Discovering Policy Surrender Rules In ULIPs

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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