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Withdrawal Conditions of ULIPs

November 13, 2018
 

A ULIP is a great investment plan as it combines insurance and investment. It allows you to withdraw a large sum of money when required, making it flexible. You can avoid loans and breaking your fixed deposit in case you require a large sum. The partial withdrawal feature of ULIP makes it an unique and flexible plan.

The partial withdrawal feature is a big perk of the ULIP. You can avail a ULIP withdrawal even before the policy matures. But the flexibility that it offers comes with a few terms and conditions. And any withdrawal could have an effect on the life cover.

There is no limit policy on how much you can withdraw from the plan. But withdrawing too much is not an option either as it can lead to termination of the policy. The wise thing to do is to leave enough in the fund to help cover the cost of ULIP plan.

There is no fixed withdrawal limit and it varies across policies and companies. A standard ULIP might permit withdrawal of up to 10% of the total premium paid. At times, the limit is 20% of the premium paid. Withdrawal is possible here after the completion of five years.

Some policies have a limit based on the fund value after the withdrawal. For example, the fund value after the withdrawal should be at least three times the annual premium. Another might demand a post-withdrawal fund value of one annual premium. Some insurers even have a cap on the minimum amount one can withdraw.

There may be limit on the no of withdrawals. Once you exceed that, a small fee may apply for any withdrawal after that. This feature is only available on active policies. To enjoy partial withdrawal, ensure you keep paying your premium.

Every ULIP comes with a lock-in period of five years. This lock-in period plays a valuable function. Your fund value is low in the beginning. Only after you have paid a few premiums does your fund value begin to grow. Consider this when looking at a partial withdrawal.

Partial withdrawal only becomes an option after the lock-in period is complete. You have to consider a few things before that. Did you make any top-up payments towards your policy? In this case, the insurer will settle your withdrawals from the top-up amount first. Only if there is no top-up amount will the base fund value come into play. Or it could be that the five-year tenure for the top-up amount is not complete. In that case, payments will be made from the base fund.

The partial withdrawal feature can help you when you really require funds. But please note that a withdrawal reduces the size of your corpus. It is suggested to use this feature only when absolutely necessary.

HDFC LIFE offers a sound ULIP to help you create wealth. Check out the link below to make a wise investment.

https://www.hdfclife.com/savings-plans /click-2-invest-ulip-plan.

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