The unpredictability of life has led to the growth of the insurance sector. Today, there are several insurance products available in the market to ensure your safety against any financial emergency. However, many people prefer a Unit Linked Insurance Plan (ULIP) due to its dual feature, which provides insurance and investment under a single integrated plan. On purchasing a ULIP Policy, you should pay a premium on regular intervals to sustain the policy in the long run.
Before buying a ULIP Plan, it is essential to understand the lock-in period of a ULIP Policy. Therefore, let’s begin by first understanding the lock-in period of a ULIP Plan:
What is a lock-in period?
Under a ULIP Plan, the lock-in period is of five years. During the lock-in period, you are not eligible to receive a pay-out, even if you decide to discontinue the ULIP policy. You can obtain the pay out only after the completion of the lock-in period. Moreover, the maturity proceeds are paid at the end of the maturity period.
On the other hand, if you stop the premium payment during the lock-in period, your ULIP policy will be discontinued. The discontinuation of a ULIP Plan is generally categorised into two:
- Before the end of the lock-in period
- After the lock-in period
NOTE: A ULIP Policy, which is purchased after 1st September 2010, has a lock-in period of 5 years.
When you don’t pay the premiums on time, an insurance company will take specific actions. Therefore, go through the following things mentioned below that happen when you don’t pay ULIP premiums during the lock-in period:
If you wish to surrender your ULIP Policy without completing the lock-in period, an insurance company will offer two options:
- The revival of the policy
- Withdrawal of all your ULIP proceeds without the provision of a life coverage
In these cases, an insurance company sends a notice within the first 15 days immediately after the expiry of the grace period. If you don’t respond within 30 days of receiving the warning about your preference, then the insurance company will move your funds to the discontinuation fund. The amount will be payable to you at the end of the lock-in period.
In case you decide to renew your ULIP policy, you should pay the unpaid premiums along with the ULIP charges, which are applicable within 2 years of discontinuation. As a policyholder, see to it that you revive your ULIP Policy before the expiry date.
Conclusion:
A ULIP Policy is a long-term investment that can help you in achieving your Life Goals. When you purchase a ULIP Policy, keep one of your long-term goals in mind and continue the policy till the maturity period. Moreover, calculate the ULIP charges, which should exclude the mortality charge of a ULIP Policy.
A ULIP Policy is neither a short-term nor a medium-term investment. Although it might offer partial withdrawal, a ULIP insurance should be bought for a long term to realize your life goals. If purchased for a long-term period, the chances of growth of funds are high. In simple words, the longer the investment period, the higher the accumulation of funds.
