Definition
Lock-In Period
The lock-in period is the minimum span during which a ULIP's funds cannot be withdrawn or fully accessed, set at five years in India.
IRDAI mandates a five-year lock-in for ULIPs, during which surrender does not give immediate access, the money instead moves to the discontinuance fund until the period ends. Partial withdrawals are only allowed after the lock-in completes.
The lock-in is intended to instil discipline and align ULIPs with their long-term, insurance-cum-investment purpose, though true wealth creation needs holding far longer than five years given front-loaded charges. It distinguishes ULIPs from open-ended mutual funds, which (barring ELSS) have no such mandatory lock-in.
Related terms
- Partial WithdrawalA partial withdrawal lets a ULIP holder take out part of the fund value after the lock-in period without surrendering the policy.
- Discontinuance FundThe discontinuance fund holds the proceeds of a ULIP surrendered or lapsed within the five-year lock-in, earning a minimum regulated return until the lock-in ends.
- Unit Linked Insurance PlanA Unit Linked Insurance Plan (ULIP) is a life insurance product that combines life cover with investment in market-linked funds chosen by the policyholder.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.