Discontinuing ULIP

If you are not happy with the performance of the ULIP scheme or if you are in need of money, you may surrender your Unit Linked Insurance Plan (ULIP) and get your money back. But there are certain rules which you need to abide before you surrender your ULIP policy. Let’s look at some of these rules of surrendering ULIP policy and how these affect you as a policyholder.

The first is the lock-in period for a ULIP, which is five years from the date of commencement of the policy.  So, you cannot withdraw money from the policy before completion of five years. However, even though you cannot withdraw money, you can stop paying policy premiums and withdraw money after completion of five years.

If you choose to stop paying policy premium, the insurer provides a window of 75 days to pay your premium, after which the policy lapses and the insurer moves it to the discontinuance fund. If you do not revive the lapsed policy, the insurer will levy a charge ranging from a maximum of Rs 6,000, to Rs 2,000, depending on whether the policy lapsed after completion of one year or four years. After five years, there will be no charge levied on the lapsed policy. The insurer will also levy a fund management charge of 0.5% of the fund value per annum on the lapsed policy.

During the window of 75 days provided by the insurer to pay the policy premium, you may choose to pay the premium and continue with the policy or opt for a complete withdrawal or allow the policy to lapse. In case you opt for complete withdrawal, the proceeds of the policy will be paid to you after completion of lock-in period of five years. However, if you allow the policy to lapse, you would get two years to revive the policy. In case you do not revive the lapsed policy, the proceeds will be paid to you after completion of five years.