The Insurance Regulatory Authority of India (IRDAI) in April this year allowed ULIP policyholders to receive their maturity amount in staggered instalments over the next 5 years. This unprecedented move was announced for policies with a maturity date on or before May 31 2020 keeping in mind the depreciation in fund value of the ULIP investment in the light of market volatility due to Covid-19. Long term investors who had purchased ULIPs 10-15 years back and were keen to make withdrawals due to a financial emergency would have had to take home an eroded maturity value, in the absence of this intervention.
However, with markets recovering from previous lows, postponing withdrawals by choosing instalments as per your comfort level can help you get better returns on your money and save you from booking a loss. This flexibility offered by a ULIP along with the benefit of choosing life insurance online as per your requirements is what sets this investment option apart. Here are a few other withdrawal choices available to you when you invest in a ULIP:
1. Withdrawing before 5 years: As a principle, every ULIP comes with a 5 year lock-in period. If you withdraw a partial amount or want to take the entire amount invested by surrendering the policy altogether, or discontinue premium payment, you will only be able to receive the funds accumulated after your ULIP investment completes 5 years. Not only this, the maturity amount moves into a discontinuance fund and consequent charges are levied. You also have to repurchase life insurance online since your ULIP life cover becomes null and void.
2. Withdrawing after 5 years: It is advisable to make partial withdrawals from your ULIP investment once it crosses the lock-in period. This feature can help you tide over a financial emergency by avoiding breaking a fixed deposit to fund your needs or taking a loan. However, certain terms and conditions are applicable on withdrawals depending on the fine print of your policy document. Some of these include:
Things to keep in mind when withdrawing from a ULIP
Partial withdrawals can lead to a reduction in sum assured for two years from the time the money is withdrawn. Post this period, the sum assured of your life insurance online as on the date of purchase of ULIP is restored provided you do not withdraw any money in these two years. Therefore, you should withdraw from your ULIP only in the case of an emergency situation.
However, to increase the fund value of your ULIP investment you can top-up your premium amount and purchase more units. An increase in the NAV of the fund invested in due to favorable market conditions can restore the money withdrawn to its original value. So use the option to withdraw from a ULIP wisely to get the most out of your investment.
Take for instance the Invest 4G plan from Canara HSBC Oriental Bank of Commerce Life Insurance which allows you to grow your wealth by investing your money across 7 different funds. Partial withdrawals are also allowed keeping in mind the financial needs of your family.
Not only this, you can customize your ULIP by opting for death benefits, premium payment and maturity benefits as per your requirements .Give your family a financial future they deserve by investing in a ULIP today. Save regularly and see your money grow with time to help you meet those cherished goals you have for yourself and your loved ones.
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