ULIP Investors Get New Settlement Option. Reasons Why You Shouldn’t Rush for It.
A policyholder receives a lumpsum amount on the maturity of a ULIP. However, the policyholders are now offered a new settlement option. A person can now select the partial settlement option. However, before choosing the new option, a policyholder needs to consider a few things.
In this article, we will explain things you need to keep in mind before choosing the partial settlement option.
A unit linked insurance plan (ULIP) provides the benefit of life cover as well as investment options. A part of the policy’s premium goes for life cover, and the other part is invested in different investment instruments like equity funds, debt funds, etc. The policyholder can choose the funds. He/she can also switch between funds to increase profits. Therefore, a ULIP provides protection to the policyholder’s family in case of his/her untimely demise. Furthermore, it can help the policyholder build a substantial financial corpus.
Generally, the amount that a policyholder receives on maturity is paid in lumpsum. However, IRDAI has introduced a new settlement option for the policyholders. They can now receive the maturity amount partially. If they choose the partial settlement option or staggered withdrawal, then they can receive the maturity amount in parts. Furthermore, the new settlement option can be selected for policies that don’t offer a partial settlement. However, is it wise to select the new settlement option?
Normally, the policyholders receive the maturity amount based on the value of the units as on the date of maturity. However, if a policyholder selects the partial settlement option, then he/she will receive an amount based on the value of the units as on the date of each withdrawal.
The partial withdrawal can be made at regular intervals- monthly, quarterly, half-yearly, or even yearly. Furthermore, if a policyholder chooses the partial settlement option but wants to stop it and opt for the complete withdrawal, then he/she can do that. However, a policyholder needs to keep in mind that life cover will not be offered in case he/she dies during the partial settlement period.
A policyholder will not be allowed to switch funds during the settlement period. The funds will be invested in the same fund options as on the date of maturity. If a policyholder selects the partial settlement option but dies before the maturity date, then the death benefit will be provided. However, the partial settlement option will not be offered. Furthermore, this staggered withdrawal can be availed for policies that don’t offer a partial settlement.
With the help of a unit linked insurance plan, a policyholder gets life cover and can receive significant returns. Therefore, if a person wants to achieve long term goals, then he/she should consider purchasing a ULIP. A policyholder will receive the returns on maturity. Furthermore, the policyholder’s family will be secure in case he/she dies during the term.
Keep these aforementioned points in mind before selecting the partial settlement option. Furthermore, a policyholder can stop partial settlements during the period and withdraw the amount.