What is ULIP Lock-In Period?

A ULIP lock-in period is the specific time when you cannot withdraw the amount you have invested in a particular Unit Linked Insurance Plan. The locking period for ULIP plan is five years, as per the amendment introduced by IRDAI in 2010. Before 2010, the minimum lock-in period for ULIP was three years. The Insurance Regulatory and Development Authority of India brought the amendment, so the extension is here.

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Let's discuss some key points of the ULIP plan lock-in period. 

Options for withdrawal

Most ULIPs do not offer withdrawal options to their investors before the end of the ULIP lock-in period. However, after the minimum lock-in period for ULIP, the investor can make a partial withdrawal. The minimum period for a ULIP is five years; however, after three years, some plans offer the privilege of partial withdrawal upon paying certain charges for the same. 

ULIP offers good returns on the investment of an individual and is highly dedicated to long-term planning. Therefore, it helps in meeting the long-term financial goals of an investor. Hence, it is preferable to refrain from withdrawing the money before the ULIP lock-in period unless the circumstances demand so. 

Discontinuance of the policy 

The ULIP lock-in period is meant to be five years. However, if you feel that the Unit Linked Insurance Plan is not living up to your expectation or there are financial needs to be met by you, you may choose to surrender your ULIP policy. Surrendering your policy before the ULIP lock-in period signifies exiting from the policy before its maturity. 

Five years is the minimum lock-in period for ULIP, so if the policy is terminated by its holder, the funds will be transferred to the discontinued policies funds, also known as DP funds. Although, the terms and conditions for the discontinuance of the policy are also applied to the policyholder. The investor is liable to get certain costs deducted from the fund. However, it does not mean that the fund will be transferred to the investor upon discontinuance of the policy. Once you discontinue paying the premium for the ULIP, the insurance company will serve you a notice within 15 days after the expiry date of paying the policy. 

Upon receiving the notice from the insurance company, you should inform the insurance company if you wish to discontinue the policy or revive the policy. 

Upon discontinuance, before the ULIP plans lock-in period, the money will only be returned to you after the completion of the ULIP lock-in period. The money will be transferred to DP funds, which will benefit from a minimum interest of 4% until the ULIP lock-in period expires. Although, the interest rate is subject to change based on the regulatory framework of the regulating authorities. In case of the demise of the policyholder, the fund will be transferred to the nominee.  

Why should you not exit after the ULIP lock-in period?

Once the ULIP lock-in period is over, you can withdraw your investment from your ULIP fund. However, you may find several valid reasons to continue with your investment after the minimum lock-in period for ULIP plan. 

Various charges are applicable for a Unit Linked Insurance Plan. Some of them are fund allocation charges, premium allocation charges, management charges of your funds, and administration fees. You're bound to pay these charges in order to exit from your policy after the ULIP lock-in period. In the initial years, the charges of ULIP are meant to be higher. Hence, the returns will be lower due to the higher charges. Nevertheless, the charges tend to reduce with time, and the returns are likely to be better. 

ULIP is for long-term investment. Hence, you should continue investing in the Unit Linked Insurance Plan instead of exiting. 


ULIP plans lock-in period should be respected by the policyholder. It is a great decision to invest in ULIP if you wish to enjoy life insurance and investment returns. Consider obliging with the long-term commitment to reap the reward it offers. You have understood the basics of the ULIP lock-in period. Learn more about it from FAQs and decide to invest in Unit Linked Insurance Plan.


  • Why should I invest in ULIPs?

    You get two benefits by investing in Unit Linked Insurance Policy. The first is that you get life insurance, and the second is that your money gets invested in the financial market. Hence, you get good returns on your investment. 
    The premium paid on Unit Linked Insurance Policy is not subjected to tax deduction under section 80C of the Income Tax Act. Further, the returns you get on the maturity of your Unit Linked Insurance Policy will be exempted from any deduction under section 10(10D) of the Income Tax Act. These are the two benefits you may claim on your policy. 
  • How ULIP works?

    While purchasing Unit Linked Insurance Plan, you may consider investing in funds such as Equity, debt, or a mix of these funds. In addition, ULIP also offers you a fund-switching option where you may switch to other funds as per your requirement. In case of the demise of the policyholder, all the benefits on the ULIP will be given to the nominee. 
  • How can I use the fund of the Unit Linked Insurance Plan?

    The Unit Linked Insurance Plan funds can be used in several ways. But in order to use it, you must not withdraw yourself from the locking period for ULIP plan. Here are three examples to consider using the fund.
    • Planning for retirement: You may plan your retirement and use the fund wisely by investing in your retirement. 
    • Education: You may consider investing the money in your child's education. 
    • Wealth creation: Wealth creation is the most prevalent option for most investors. You can make investments and utilize the money to meet your future financial goals.

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