What happens when you stop paying ULIP policy premium during lock-in period

Unit linked insurance policies (Ulips) combine an investment option with an insurance cover during the policy term. Typically, Ulips have a lock in of five years.

During this period, the policyholder does not receive any payouts. Withdrawals are allowed after the end of the lock-in. Maturity proceeds are paid at the end of the maturity period.

There could be instances where the policyholder may want to discontinue the Ulip, either because he is not happy with the policy or there are some issues with paying the premium.


Discontinuance is treated in the following manner depending upon the year in which the premium payment was discontinued.

Policies with 5-year lock-in period
Policies issued after 1 September 2010 have a lock-in period of 5 years from the date of commencement of the policy. Two options are provided to the policyholder in case of a discontinued policy:

• Revival of the policy
• Withdrawal without insurance cover

Notice by insurance company
Once the premium payment is discontinued by the policyholder, the insurance company sends a notice within 15 days after the expiry of the grace period of the policy with regards to revival of the policy.

Complete withdrawal
The policyholder, within 30 days of getting the notice, should intimate the insurance company if he wants to completely withdraw the policy. In such a case, the insurance company will reimburse proceeds of the discontinued policy at the end of the lock-in period.

Point to note

• If the option to revive policy is chosen, the policyholder must revive the policy by paying unpaid premiums and applicable charges within 2 years of the discontinuance.
• Revival of the policy should be carried out before the expiry of the lock-in period.

(The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)