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ULIP Lock-In Period

Lately, many people have been investing in ULIP plans (Unit Linked Insurance Plans). It is a long-term investment instrument that offers dual benefits – benefits of life insurance coverage and market investments of your choice.

Everything You Need To Know About Top-Up Premiums In ULIPs

Here, a part of the premium is directed towards life coverage, whereas the remaining amount is used to invest in your choice funds. You can invest in equity-oriented funds, debt funds, or a combination of the two. People with a high-risk appetite can invest in equity funds. If you have a low-risk need, you can invest in debt funds. It is also noteworthy that you can switch between equity and debt whenever you want (depending on the market movement).


Apart from high returns, certain charges deducted under ULIPs are as follows –

  • Premium allocation charges
  • Mortality charges
  • Fund management charges
  • Administration charges
  • Surrender charges
  • Switching charges

Here’s an example of a ULIP investment –

PolicyholderAge: 35 years

Gender: Female

Sum AssuredINR 2.5 Lakh
Policy Tenure20 Years
Annual PremiumApprox. INR 25,000

Considering an 8% return on the investment, you (the policyholder) will receive an approximate INR 20 Lakh upon policy maturity.

What Is the ULIP Lock-In Period?

It is the duration within which you will not receive the stipulated payout if you (the policyholder) surrender or discontinue the ULIP plan. Generally, the lock-in period for ULIPs is five years. After completion of the lock-in period, you will receive the necessary payout.

It would help if you did Not Exit ULIP As Soon As the Lock-In Period Ends.

Here are a few reasons why you should not exit the ULIP investment as soon as the lock-in period completes –

1. ULIP charges are high in the initial years

The premium allocation charges are deducted before the premiums are invested. Apart from this, fund allocation charges, fund management fees, and policy administration fees are deducted through units’ cancellations or adjusting the NAV.

Generally, these deductions are done heavily during the initial years of ULIP plans and are reduced over time. When the lock-in period ends, these deductions come down to a point where they do not impact the fund amount.

In other words, it means that the money invested during the lock-in period is relatively low than in the latter years of the policy. Likewise, terminating the plan immediately after the lock-in period ends will reap your low ULIP returns.

You will have to pay surrender charges if you terminate the ULIP investment before the lock-in period ends. However, you will receive the invested money only after the lock-in period ends.

2. Investing in long-term ULIP will reap your benefits.

As we mentioned earlier, ULIP is a long-term investment. If you want to benefit from your ULIP investment, you should stay invested for a long time (at least 15 to 20 years). Although you can exit the plan after a five-year lock-in period, it is highly advisable not to do so.

Depending on the market movement, if your chosen funds are not performing well, you can make the necessary changes with an option known as a switch. If you have invested in equity-oriented funds, you might as well want to be supported for a long time. Equity funds reap high returns when they stay invested for extended periods.

If you withdraw your funds in the lock-in period, here are the ULIP benefits you will miss.

To Sum It Up!

Instead of terminating the ULIP investment, you can make a partial withdrawal to overcome a financial crunch in times of emergency. Continue the ULIP plans to maturity and watch your money grow. If you want to build your wealth over time, ULIP plans are the best available investment option.

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