Definition
Partial Withdrawal
A partial withdrawal lets a ULIP holder take out part of the fund value after the lock-in period without surrendering the policy.
ULIPs in India have a five-year lock-in, after which partial withdrawals are generally allowed subject to maintaining a minimum fund balance and limits set by the insurer. The cover usually continues, though the death benefit may be reduced by withdrawals made shortly before a claim.
Partial withdrawals provide liquidity for goals like education or emergencies while keeping the policy alive. They are typically tax-free within the existing exemption rules, but excessive withdrawals can reduce the fund's compounding and erode the maturity corpus.
Related terms
- Top-Up PremiumA top-up premium is an additional, voluntary lump-sum payment into a ULIP over and above the regular premium, to boost the investment.
- Lock-In PeriodThe lock-in period is the minimum span during which a ULIP's funds cannot be withdrawn or fully accessed, set at five years in India.
- 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.