When you invest in ULIPs, there are various benefits that you can enjoy. Investment, insurance cover, and tax benefits, just to name a few. However, there is one more benefit that is quite helpful to many. This benefit is known as a partial withdrawal. Partial withdrawals allow you to withdraw a certain amount from a ULIP plan to cover major expenses. Read more to know more about ULIPs, partial withdrawals, and how they can be beneficial to you as an investor.
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What is ULIP?
A ULIP policy is a life insurance product that gives you the dual benefit of investment and insurance in the same policy. Investments allow you to grow your wealth for a secure future. Insurance cover provides financial security to your loved ones from different life risks. Based on your risk appetite, you can invest in either equity funds or debt funds.
What is partial withdrawal?
Many ULIP policyholders could be required to take care of expenses related to a medical procedure; or it could be related to developing a property. The expense could be anything and could require immediate funds. In such cases, the policyholder will make a partial withdrawal from their ULIP funds. As per the new rules set by the IRDAI, you are allowed to make 3 partial withdrawals from your ULIP after the lock-in period ends, which is of 5 years.
If you want to make a partial withdrawal before the lock-in period ends, you will not be able to do so. Withdrawals during the lock-in period are not allowed, even if you have paid the annual premium or are willing to surrender your policy. Partial withdrawals can be made only after the end of the lock-in period.
When should you do it?
While it is usually advised to not go for a partial withdrawal, there could be circumstances where you could require funds urgently. In such situations, partial withdrawal could help you in taking care of those expenses. Coming to how much you can withdraw, the maximum amount that you can withdraw is 25% of the fund’s value.
One thing that you should keep in mind when doing a partial withdrawal is that it does have an impact on the value of your fund. It also impacts your sum assured. As the amount is being withdrawn from your fund, you will have to reinvest money in funds to be able to regain that much money. However, the amount withdrawn gets restored in the sum assured after 2 years. This restoration is only applicable if another withdrawal is not initiated during the 2-year period after the 1st withdrawal. Also, you are required to pay your premiums in order to be eligible for the restoration of the premium.
When can a partial withdrawal be done?
As partial withdrawal is allowed only after 5 years, policyholders who have paid all the premiums are eligible for partial withdrawals. Paying your premium and then wanting to surrender your ULIP policy will not make your eligible for partial withdrawal. Also, even if you do surrender your policy, you will not be able to get the money until the end of the lock-in period.
What is the benefit of partial withdrawal?
One of the main benefits is that it does not impact your returns; given that you meet the criteria. Secondly, it helps in taking care of immediate expenses. This means you will not have to rely on other sources to be able to take of those expenses. If the policyholder passes away due to unfortunate circumstances after the withdrawal, their loved ones will get the reduced sum assured. The only downside of partial withdrawal is the reduction in the fund value. As an investor, it could take some time to be able to regain the same fund value before withdrawal.
This was all the information related partial withdrawals. If you want to do one from your ULIP policy, make sure that you match the criteria and only use for essential expenses. To know more about the other benefits that you can enjoy with ULIPs, you can get in touch with your insurance advisor or visit the website of your preferred insurer. For more information on how to withdraw money out of the NPS in small amounts, visit this website: https://dailipay.net/