Here’s Why You Should Not Exit ULIP Investments Once the Lock-In Period is Over

Building wealth can be quite liberating. When you are financially stable, you can take care of your expenses, deal with unprecedented emergencies, provide a comfortable life to your loved ones, and carry out all of your dreams and goals. However, with a myriad of policies available in the market, it becomes difficult selecting one. This is why several individuals opt for options like ULIP investments.

With ULIPs, you will get the dual benefit of insurance coverage and market-linked returns. This way, you can protect your loved ones from emergencies and build wealth under the same plan. ULIP policies have the potential to offer you great profits through investment. However, you must keep up with the premium payments. 

If you stop paying the premiums for the ULIPs during the lock-in period, you will get to access the returns from the paid premiums only after the lock-in period is over.

Most individuals generally decide to exit the ULIP once the lock-in period of the policy is over. However, doing so can be quite harmful to your financial goals.

Reasons Why You Shouldn’t Exit ULIP After the Lock-In Period

Here are some reasons why you shouldn’t exit the ULIP investment after the lock-in period is over:

  1. Charges can be quite high during the initial years: In the ULIP policy, the premium allocation charge is deducted before the premium investment. In addition, several charges like the fund allocation, fund management, and administration fees will be deducted either through unit cancellation or by fixing the NAV. 

The deduction will be high in the first year, reducing over time. Once the lock-in period is over, the charges come to a level where they do not impact your funds. This means that your investment during the lock-in period was quite low, and to earn substantial ULIP returns, you must continue the investment for a longer tenure than the lock-in period.

  1. Performance of funds: The funds you choose for your ULIP investment will perform based on several factors. First, there may be instances where your ULIP investment does not perform as per your expectations. In these cases, exiting from the investment may not be profitable for you. 

If you’ve bought an equity-based ULIP policy, your returns may fluctuate heavily depending on the volatility in the market. Therefore, you mustn’t exit the fund during a bullish market, as you may either break even or suffer losses. 

If your fund isn’t performing well consistently, you can utilise the switching feature offered in ULIPs and switch to a better performing fund. Even if your fund does perform well, holding your investment in the market for a longer tenure than the lock-in period will help you profit from the power of compounding. Compounding helps you earn interest on interest. When you hold your investment in ULIPs for 15-20 years, you get to earn substantial returns with the help of compounding.

  1. Loyalty additions: Several insurers like Tata AIA offer loyalty bonuses with the Tata AIA life ULIP plans. These bonuses are offered to policyholders who hold their ULIP policies for a long tenure with the insurance company. Earning these loyalty additions with the returns can help you increase the profits you earn through the plan. However, when you exit your ULIP plan just after the lock-in period is over, you may miss out on the loyalty additions that you have earned.


Exiting the plan just after the lock-in period in ULIP is over may not be profitable for you in the long run. You may miss out on the profit potential of the investment you have made. Along with this, you will also not get the loyalty bonuses offered by insurers.