ULIP Partial Withdrawal After 5 Years: Rules, Tax & Limits

Written by : Knowledge Centre Team

2026-06-22

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6 minutes read

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Often considered among the most prudent financial instruments available today, the Unit-Linked Insurance Plans or ULIPs offer the unique advantage of life insurance protection and wealth appreciation through investments - all under the same plan. ULIPs have a lock-in period of five years, where your money is invested in various market-linked fund options of varying degrees of risk. One of the several advantages of ULIP investments is the availability of partial withdrawals, wherein you can easily withdraw money from the accumulated fund value to take care of any urgent requirement. After the completion of the lock-in period, you can make partial withdrawals. However, this flexibility that ULIPs offer comes with a few terms and conditions.

Key Takeaways

ULIPs come with double benefits: investment growth and life cover, and also allow partial withdrawals after five years, ensuring flexibility.
Generally, you are only allowed to withdraw up to 10% of the total premium paid. However, restrictions and regulations vary from insurer to insurer.
Withdrawals before the lock-in period are not allowed. It can lead to surrendering, which in turn can cause deductions and delays in fund disbursement.
Partial withdrawals can help you meet your short-term needs but may reduce the sum assured, eventually affecting the policy benefits.
Only active plans qualify for partial withdrawals, which makes it essential to pay premiums on time and prevent dues as much as you can.

What is a Partial Withdrawal?

Partial withdrawal in ULIP is a facility wherein you can easily withdraw money from the accumulated fund value to take care of any urgent requirement. After the completion of the lock-in period, you can make partial withdrawals in ULIP. However, this flexibility that ULIPs offer comes with a few terms and conditions.

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Limits on Partial Withdrawal

Typically, there is no fixed limit on the amount that you can withdraw from your active ULIP policy. However, you shouldn’t overuse this facility so much that there are not enough funds left to help cover the ULIP cost. Otherwise, it could lead to policy termination. The limits of partial withdrawals of Unit Linked Insurance Plan may vary from one insurer to another. Usually, you can make withdrawals of up to 10 per cent of the total amount of premium paid, but only after completing the mandatory lock-in period. Also, the insurance company may introduce other limitations, such as those on the minimum amount or the number of partial withdrawals made in a year. Therefore, you must go through the policy document of your ULIP plan to know more about these terms and conditions, while making sure that you keep paying the premiums on time.

Making Partial Withdrawals Before the Completion of the Lock-in Period: There is no provision under ULIPs to make partial withdrawals before the end of the mandatory lock-in period of five years. Even if you decide to surrender or discontinue the ULIP policy during the lock-in period, you can expect to receive the money (after deduction of surrender and policy discontinuation charges, as applicable) only after completing the five-year period.
Making Partial Withdrawals After the Lock-in Period: As the policyholder, you are eligible to make partial withdrawals after the lock-in period is over. There are, however, specific points that you need to consider before making any withdrawals from the accumulated funds.
1. You cannot withdraw the entire accumulated fund amount before maturity, or without surrendering or discontinuing the policy
2. If you have purchased the ULIP plan for your child, who is a minor, he or she can make partial withdrawals from the policy only after turning 18

Effect of Partial Withdrawal on Life Cover: There are chances that you might worry about whether there would be any effects of making withdrawals from your insurance coverage. Usually, every partial withdrawal you make leads to a decrease in the sum assured under the ULIP life coverage. In case you have made the withdrawal more than two years before the unfortunate demise of the policyholder, there will be no effect on the sum assured. Here, you must go through the policy document to learn about how partial withdrawals work for your chosen plan coverage.
Regular Payment of Premium is Crucial: To avail of the several benefits of the ULIP plan, including a partial withdrawal facility, you must always pay the premiums as per the schedule, keeping the policy active without any interruptions. In case there are any lapses, suspensions, or disputes in payment of premiums, the insurance company may disallow further partial withdrawals.

The amount withdrawn after the five-year lock-in period is generally tax-exempt under Section 10(10D), provided the total annual premium for policies issued after Feb 1, 2021, does not exceed ₹2.5 lakh. This allows you to fulfill immediate life goals using accumulated funds without heavy tax implications for most standard plans. However, you must adhere to the maximum number of partial withdrawals that you can make in a year, as specified in your policy underwriting, so that you can avail of maximum benefit from your ULIP investment.

We at Canara HSBC Life Insurance offer plans that allow you to maximise your accumulated wealth by investing your savings across seven different fund options. At the same time, you can make partial withdrawals to fulfil your family’s immediate financial needs.

Did You Know?

In India, ULIP premiums over ₹2.5 lakhs (post-Feb 2021) lose tax-exempt status under Section 10(10D) for maturity and withdrawals

Source: Moneycontrol

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Eligibility Criteria for Partial Withdrawals

If you are planning to partially withdraw from your ULIP, be aware that there are certain criteria that you must meet. These are usually set by the insurer and are made to ensure the policy stays financially sustainable when you use its flexibility feature to meet your requirements. The following are the key factors:

Now that you are familiar with the concept of the lock-in period, you must also know that partial withdrawals are only permitted once the five-year lock-in is completed.
Insurers usually have a set maximum and minimum limit for these withdrawals. It is a percentage of the premium paid or the fund value
All your payments should be made, and there should not be any dues or lapses. If the ULIP policy is inactive, the withdrawal is not possible
Children cannot partially withdraw from ULIP plans. Child plans are withdrawable once the child turns 18
It is essential to read the ULIP document carefully to understand the limitations better because each plan is different and has a unique set of rules related to the number of permitted withdrawals and changes

Step-by-Step Guide on: How to Make a Partial Withdrawal from ULIPs?

Looks like you have gone through all the eligibility requirements. If you meet them, proceed to make a partial withdrawal from your ULIP. Worry not! It is a straightforward process. Follow these steps:

Carefully check all the terms and conditions of the ULIP plan and understand what your limits are, if there are any charges associated with the translation and how much it may affect the life cover
Decide on a particular amount that you want to withdraw, affecting the least of your funds for the future and the life cover
Now, start by filling out the withdrawal request form that you can obtain from the official website of the insurer, or you may visit the branch office for further assistance
Submit the documents that the insurer asks for. These can be identity proof, policy documents, bank account information and other essential particulars for the fund transfer
Once the request is sent and processed, it will be disbursed into your registered bank account within the set timeframe. It may take a few working days for the processing to complete

This is a seamless procedure that helps you access your funds trouble-free while ensuring your ULIP policy remains intact. It helps balance your short-term liquidity needs with long-term financial security.

Wrapping Up

ULIPs offer a unique combination of life insurance protection and investment flexibility. Partial withdrawals allow you to access your accumulated funds after the lock-in period to meet unforeseen needs. However, it's crucial to understand the terms and conditions of your ULIP plan, including withdrawal limits and the impact on your life cover. Remember, consistent premium payment is essential to maintain policy benefits and avoid lapse. By carefully considering these factors, you can leverage ULIP's partial withdrawal feature to balance your long-term financial goals with short-term liquidity needs.

Glossary

Lock-in Period: A period (usually five years) during which you cannot withdraw money from your ULIP without penalty
Premium: The fixed amount you pay periodically to keep your insurance policy active and maintain your life cover and investment
Sum Assured: The death benefit that will be paid to your beneficiary if you die during the policy term
Policy Surrender: Cancelling your ULIP before maturity. You may get back less than you invested after applicable surrender charges
Maturity: The end of the policy term. At maturity, you receive the total fund value of your ULIP plus any declared bonuses

FAQs

Yes, ULIPs allow partial withdrawals after the lock-in period (usually five years).

Partial withdrawal means taking out a portion of your invested money in the ULIP.

The limit on partial withdrawals can vary by insurer, but it's generally around 10% of the total premium paid or 20% of the fund value (whichever is lower). There may also be limits on the number of withdrawals allowed. Check your policy documents for specifics.

After five years (assuming you've paid all premiums up to that point), you might be able to withdraw up to 10% of the total premium paid or 20% of the fund value, whichever is lower. Again, refer to your ULIP policy documents.

Generally, a ULIP withdrawal after 5 years is tax-exempt under Section 10(10D). However, if your total annual premium exceeds ₹2.5 lakh for policies issued after February 1, 2021, the tax on ULIP withdrawal will apply as capital gains.

Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.

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Partial Withdrawal of ULIP: All You Need to Know

Key Takeaways

What is a Partial Withdrawal?

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Limits on Partial Withdrawal

Did You Know?

Eligibility Criteria for Partial Withdrawals