A lock-in period is, as the name suggests, the period during which you are locked into the ULIP scheme. During this period, as you are not able to make withdrawals.
In the case of Invest 4G, the lock-in period is 5 consecutive policy years from the date of commencement of policy during which no benefits will be payable, except in case of death of the life assured.
This is in line with the latest guidelines of the Insurance and Regulatory Development Authority of India (IRDAI). In 2010, the lock-in period was extended from 3 years to 5 years, including top-up premiums. This increase was brought in to signify that ULIPs are meant to serve the purpose of long-term investment goals.
If you surrender or discontinue the ULIP during this 5-year stipulated period, you will receive no liquidity or payout at the end of 5th policy year only. Withdrawals are allowed after the end of the lock-in. Here’s how this works: if you stop paying premiums during the lock-in period, you are given the option to either revive the policy within the revival period or go ahead with the withdrawal from the policy without any risk cover at the end of the lock-in period.
As is clear, it is advisable to stay invested in your Unit Linked Insurance Plan for longer durations to be able to reap the benefits. You can always exercise the option of fund switching if you feel like they’re underperforming, but it is always a good idea to stay invested for longer period even beyond the lock-in period.