Partial Withdrawal Of ULIPs: All You Need To Know

 A Unit Linked Insurance Plan is a type of insurance policy that offers a life cover and at the same time has an investment and wealth creation component. Many people choose a ULIP plan over a traditional insurance plan for its flexibility. One of the most useful benefits of a ULIP plan is the ability to make partial withdrawals from the fund value even before the policy matures. With this advantage, you can look towards your ULIP plan in case you face a financial crisis and are in urgent need of funds. 

Even though you can easily make a partial withdrawal from your ULIP plan, it is important to understand the specifics of this process to be better prepared before doing this, because it can affect your overall plan. 

How a ULIP Partial Withdrawal Works

Allocation of Premium

Before we look into partial withdrawals, it is important to know that the premium you pay for your Unit Linked Insurance Plan is divided into two parts. One part goes towards the insurance component, while the other part is invested in various capital market funds. 

The part that is invested is divided into units, with each unit having a specific value. When you make a partial withdrawal, the ULIP will let you remove some of those units and withdraw funds equivalent to the value of those units. So, in essence you’re withdrawing a part of your total fund value. 

Effects of Partial Withdrawal 

It must be understood that a partial withdrawal, even though very useful, has some effect on your ULIP plan. Let us have a look.

Let us assume you have a ULIP plan with a sum assured of Rs. 5 lakh. In a time of emergency, you decide to withdraw Rs. 1 Lakh from your policy. Your ULIP policy will be affected in the following ways:

– Your fund value will be reduced by the amount that you withdrew, which is Rs. 1 lakh in this case. 

– The sum assured, which was Rs. 5 lakh, will also decrease by Rs. 1 lakh and remain at that value for the next two years. 

So, it is important to remember that if during these two years something were to happen to you that leads to your unfortunate demise, your nominee will get the reduced amount and not the entire sum assured. 

Will the original sum assured and fund value be restored?

After the completion of two years, if no additional withdrawals were made and the premiums were paid regularly, the original assured sum will be restored.

The fund value, however, depends on additional paid premiums and the value of invested units. 

Partial Withdrawal Limits  

– A ULIP Plan has a lock-in period of 5 years. A partial withdrawal can only be made after the lock-in period and not before. Even if the policy is surrendered during the lock-in period, the withdrawals can only be made after the lock-in period is over. 

– One must be 18 years of age or older to make a partial withdrawal from a ULIP.

– Throughout the tenure of the policy, partial withdrawals can only be made three times according to the new rules by the IRDAI.

– Partial withdrawals are only allowed if your policy is in force and all premiums are paid on time. 

– The amount you can withdraw depends on your insurance provider, but the maximum amount you can withdraw in a policy year cannot exceed 25% of the total fund value. 


Perial withdrawals can come in handy during times of financial crises. But these withdrawals will reduce your fund value and the sum assured to your nominee. Hence, experts advise that you refrain from doing so unless it is an absolute emergency.