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3 Things to Know Before Discontinuing ULIP Policy

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3 Things to know before discountinuing ULIP Policy
October 23, 2023

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In this policy, the investment risks in the investment portfolio is borne by the policyholder

A Unit Linked Insurance Policy (ULIP) can be an excellent investment option for you depending on your financial goals. ULIP investments allow you to diversify your portfolio across both debt and equity market segments easily with just one product, while simultaneously giving you the benefit of a life cover and protecting your family financially.

Before you invest in a Unit Linked Insurance Policy, you can use a ULIP Calculator to check the potential returns you will earn, subject to market situation, or the amount you need to invest periodically to build the requisite corpus. There might be certain circumstances where you might need to discontinue the ULIP policydespite the best planning. Or, you may not be able to pay your premiums anymore.

3 Things to Know Before Discontinuing Your ULIP Policy

Before you discontinue your policy, there are some important things that you should be aware of. They include the following:

  • Your ULIP has a Lock-In Period
    Unit Linked Insurance Plans issued on or after September 1, 2010 have a lock-in period of 5 years. During this period, you cannot make any withdrawals from your ULIP investment corpus. That said, after the completion of the lock-in period, you can withdraw your funds partially or completely as needed. So, if there is no emergency that requires immediate ULIP discontinuance, consider waiting for the lock-in period to end.
  • You Have the Option to Revive Your Policy
    You can choose to revive your lapsed policies, provided you do so within the Revival Period and before the Date of Maturity. This revival necessitates clearing all overdue premiums and late charges, if any. For discontinued policies, proof of insurability might be required, and the insurance company can either accept revival with original or modified terms or may reject it. In case of failure to revive a lapsed policy within the revival period of three years may result in policy termination, and after lock in period insurance company shall refund the fund value available in the discontinued fund after deducting charges, if any.
  • You Can Also Choose to Discontinue the Policy
    If you do not want to revive the policy, you must inform your insurer about your decision within 30 days of receiving the notice for policy revival. In this case, you will receive the proceeds from your plan, such as the surrender value, at the end of the lock-in period. This will be taxable as a part of your total income, at the slab rates applicable to you.

Conclusion

Discontinuing your ULIP investment is a major decision, and it should not be taken lightly. However, after weighing your expenses and income, if you find that you will not be able to pay your premiums, this will be an inevitable choice. That said, if you are only planning to discontinue your policy because it is not performing as expected, you can always use the fund switching option to move your money from less promising funds to better performing options. A ULIP Calculator can help you make smart fund switching decisions.

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Author Profile Written By:
Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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Disclaimer

The Unit Linked Insurance products do not offer any liquidity during the first five years of the contract. The policyholders will not be able to surrender or withdraw the monies invested in Unit Linked Insurance Products completely or partially till the end of fifth year.

Unit Linked Life Insurance products are different from the traditional insurance products and are subject to the risk factors. The premium paid in Unit Linked Life Insurance policies are subject to investment risks associated with capital markets and the NAVs of the units may go up or down based on the performance of fund and factors influencing the capital market and the insured is responsible for his/her decisions. HDFC Life Insurance Company Limited is only the name of the Insurance Company, The name of the company, name of the contract does not in any way indicate the quality of the contract, its future prospects or returns. Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document of the insurer. The various funds offered under this contract are the names of the funds and do not in any way indicate the quality of these plans, their future prospects and returns.

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