The con­di­tions that con­trol par­tial with­drawal from Ulips

Mint Asia ST - - Otherviews - BDY EEPTI B HASKARAN


linked in­surance poli­cies (Ulips) come with a 5-year lock-in, af­ter which you can sur­ren­der your pol­icy and make full with­drawal with­out any exit load or sur­ren­der charges. But what hap­pens if you don’t want to close your pol­icy, but need to with­draw some amount?

Lim­its on with­drawal

Ulips comes with a 5-year lock-in. Par­tial with­drawals can only be made af­ter 5 years. Also, in case a mi­nor’s life is in­sured, par­tial with­drawals can be made only when the life in­sured is 18 years old.

If you have made top-ups pay­ments, then the par­tial with­drawal re­quest will first have to be met from the el­i­gi­ble top-up funds. Sub­se­quently you can make par­tial with­drawals from the base pol­icy. Also, keep in mind that even top-up pre­mi­ums come with a lock-in of 5 years. So in case the top-up is still un­der the lock-in, then the par­tial with­drawal will hap­pen from the base fund value.

With­drawal limit

There are no rules around how much a pol­i­cy­holder can with­draw. The idea laid down by the reg­u­la­tions is that the pol­i­cy­holder shouldn’t with­draw so much that it might lead to ter­mi­na­tion of the pol­icy con- tract.

How­ever, poli­cies will have spec­i­fied their own lim­its. For in­stance, a reg­u­lar pre­mium Ulip that we looked at spec­i­fied that the fund value should not fall be­low three times the an­nual pre­mium af­ter a par­tial with­drawal and that a sin­gle par­tial with­drawal re­quest only al­lows you to with­draw up to 10% of the to­tal pre­mi­ums paid.

Another pol­icy al­lows un­lim­ited par­tial with­drawals, with the min­i­mum par­tial with­drawal at Rs500 and a max­i­mum to an ex­tent such that the re­main­ing fund value is at least 105% of to­tal pre­mi­ums. Par­tial with­drawals are paid by can­celling the units on the day the in­surer re­ceives the with­drawal re­quest.

But if the re­quest comes af­ter 3pm, then the net as­set value (NAV) of the next work­ing day is taken while can­celling the units.

In­surance cover

Par­tial with­drawals have a bear­ing on the in­surance cover in the base pol­icy as well. So, the sum as­sured payable on death stands re­duced to the ex­tent of the par­tial with­drawals made, dur­ing the 2-year pe­riod im­me­di­ately pre­ced­ing the death of the life as­sured. If a par­tial with­drawal was made be­fore that, then it has no bear­ing. But if death oc­curs af­ter 60, then all the par­tial with­drawals made within 2 years be­fore at­tain­ing age 60 and all the par­tial with­drawals made af­ter can be used to ad­just from the sum as­sured.

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