Unit Linked Insurance Plans are a suitable option for customers who want to gain an investment advantage while also having an insurance plan they can count on. In terms of returns, these plans tend to work better when maintained for the long term. However, if you want to draw money from this plan for any reason, know that ULIPs also offer partial withdrawals.
What Are Partial Withdrawals In ULIPs?
Consumers may want to rely on their existing insurance or investment plans in times of need and draw money from them. ULIPs offer this opportunity through a feature called ‘partial withdrawals’, which is one of the many advantages offered by ULIPs. One can make these withdrawals from the accumulated fund value. This feature enables customers to get more gains out of their plans, other than insurance and returns.
ULIP Partial Withdrawal Rules
There are some rules regarding partial withdrawals that one should know about:
- Partial withdrawals are allowed only after the lock-in period. Most ULIPs come with a lock-in period of five years. Hence, you will not be able to utilise the feature in the first five years.
- While this may vary from plan to plan, most ULIPs will allow withdrawals only up to a certain percentage of the value of the plan. The remaining value after withdrawal should suffice for the maintenance of the ULIP. You can consult your policy document and a ULIP calculator to figure out how much can you get as a partial withdrawal, without affecting the function of your plan.
- In case the person insured by the ULIP is a minor, the partial withdrawal feature does not take effect till they turn 18 years of age.
- There is a limit on the number of partial withdrawals you can make from a ULIP. Once you are past this limit, you will be required to pay administrative charges.
Advantages Of Partial Withdrawals
The maximum amount of partial withdrawal you can make in a single instance depends on the corpus of your ULIP. For example, if your plan value is Rs. 100,000 and the partial withdrawal can only be 30% of the value, then you will be able to withdraw Rs. 30,000 only.
The way you can use the partial withdrawal will depend on the value withdrawn. You can use this to explore other avenues of investment. You can also use this for short-term undertakings such as home or office renovation, vacation, investing in new ventures, and more.
A partial withdrawal may eliminate the need for a personal loan in some cases, thus making ULIPs a more lucrative option for them.
Limits Of ULIP Partial Withdrawals
While partial withdrawals may be a tempting and accessible option, know that using them heedlessly for frivolous expenses that can be managed through other means, would not be a good idea. There are some limits on ULIP withdrawals that may help you use the feature responsibly.
One of these limits is the way partial withdrawals can affect your sum assured. For every partial withdrawal made, the sum assured may decrease for two years. If the age of the life assured is lower than 60 years, the sum will then be restored. However, if the person insured is over 60 years of age, then the sum assured affected by partial withdrawals will not be restored. Since the life insurance aspect of your ULIP is managed separately, this does not affect your ULIP plan returns directly. Your policy document and an online ULIP calculator should be able to help you with the details.
Another aspect of ULIP you should be aware of is the top-up premium. If included in your plan, a top-up premium is a payment you make to increase your investment in the ULIP. This is in addition to your regular premium payment. If you have paid a top-up premium, then you can expect your partial withdrawal to be taken from that.
ULIP partial withdrawals, when used responsibly, can be of use in times of need. This, and many such features, together add value to Unit-linked Insurance Plans and what they have to offer.