In Unit-linked plans, the investment risk in the investment portfolio is borne by the policyholder

A Unit Linked Insurance Plan (ULIP) is an insurance policy that offers the double benefit of life cover and wealth creation, thereby, helping you achieve the dreams of you and your loved ones. One unique advantage of this plan is that even before your policy matures, you can take out a part of your accumulated fund value. With this flexibility, you can face a financial crisis without taking high-interest loans or liquidating your assets.

While ULIPs have this unique advantage, it is important to understand the features and details of this plan to stay better prepared.

How Partial Withdrawal Works

Premium allocation:

When you invest in a ULIP, a fixed premium needs to be paid, basis the chosen life cover amount. One part of the premium is for providing coverage and the other part is invested in various capital market funds.

Withdrawal of funds:

The part of premium that gets invested, gets divided into units, each with a specified value. In case of any emergencies, ULIPs allow you to redeem some of those units and withdraw money equivalent to those units.

Effect of withdrawals:

While the partial withdrawal feature is helpful during times of need, it also has some conditions to it.

For example, if your sum assured at inception was fixed at ₹ 5 lakh, and you withdraw units equivalent to ₹ 1 lakh, then your policy will be affected in 2 ways:

  • Your fund value will decrease by the amount you take out, in this case, ₹ 1 lakh
  • Your life insurance sum assured will also go down by ₹ 1 lakh, turning into ₹ 4 lakh, and remain at that value for the next two years

Therefore, if an unfortunate event occurs during those two years, your nominee will get the reduced sum assured. Hence, this feature must be used carefully.

Restoration of sum assured and fund value:

If you do not make any further withdrawals during these two years and pay premiums regularly, the sum assured is restored to its original value at the end of this interval. The fund value, on the other hand, depends on any additional premiums paid or any increase in the value of the invested units.

Limits on Partial Withdrawals

  • A total of three partial withdrawals can be made during the entire policy tenure*. It is advisable to coincide those with major life events, such as your child’s wedding, their college admission, real estate purchase, any critical illness, and other long-term financial goals
  • One must be 18 years of age or above to be able to make partial withdrawals
  • Also, to withdraw money from the ULIP, it must be in force, with all due premiums paid on time
  • The minimum and maximum amounts that you can take out may vary with each policy and across insurance providers. However, the maximum withdrawal in a policy year cannot exceed 25% of the total fund value
  • Some policies limit the withdrawal amount based on the value of funds remaining after the withdrawal

Withdrawal before the Lock-In Period

ULIPs have a lock-in period of five years from the start date. Within this period, if the policy is surrendered, the payouts will not be received and no withdrawals can be made until this five-year term is over.

After the initial five years, a part of the funds can be taken out without having to pay any surrender charges or face any exit load on the policy.

How to choose the right plan?

While deciding to buy a ULIP, it is better to look for a plan which provides maximum benefits as per the preferred budget. Also consider factors like the stability, customer service quality, the reputation of the brand being opted for, etc. ICICI Pru Lifetime Classic is one such plan that helps to build wealth while also providing the policyholder’s family with a financial safety net in case of an unfortunate event.

Here are some of the top features of the plan:

  • Financial protection: In case of an unfortunate event with the policyholder, the nominee gets claim ammount and prevailing fund value as a lump sum payout
  • Rewards: Just by paying premium regularly and staying invested, loyalty additions and wealth boosters get added to the investment
  • Top-up option: Investment in the plan can be increased anytime as per convenience by using the top–up facility
  • Flexible payment options: Premiums can be paid monthly, half yearly, yearly or as a one-time payment
  • Invest in funds of choice: Various choice of equity, balance and debts funds, allows to invest as per your risk appetite
  • Tax# benefit: Enjoy tax# benefits as per the prevailing tax# laws


Partial withdrawals are useful in financial shortfalls. However, such withdrawals reduce the size of your total funds and also impact the benefits payable to your nominee. Hence, unless it is an absolute emergency, financial experts advise against withdrawing from your ULIP funds and encourage allowing your savings to benefit from long-term capital growth.

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# Tax benefits under the policy are subject to conditions under Section 80C, 80D, 10(10D), 115BAC and other provisions of the Income Tax Act, 1961. Goods and Services tax and Cesses, if any will be charged extra as per prevailing rates. Tax laws are subject to amendments made thereto from time to time. Please consult your tax advisor for details, before acting on above.
ICICI Pru LifeTime Classic UIN 105L155V05
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