Charges deducted in ulips - Best Ulip Insurance Policy

1. Charges Deducted in ULIPS

2. When did you last receive a call from a telemarketer selling a unit linked insurance plan ? It must have been a while now. Ulips, which not long ago were the darling of insurance brokers, have fallen out of favour among intermediaries after the new norms for the products came into effect from September 1, 2010. It is no longer as lucrative for brokers to sell Ulips after the Insurance Regulatory and Development Authority (Irda) placed severe restrictions on upfront commissions and charges, which prior to the new norms at times shaved off the entire first year premium paid by a policyholder.  Often investors had to wait for years to recover their initial investment. Under the new norms, Ulips are now clearly structured to favour the consumer. With far less being deducted from the premia compared to pre-September 2010, more is invested, thereby holding out potential for higher returns. The regulator has also stipulated higher minimum insurance covers on best Ulip insurance policy while they have been positioned as long term products with longer lock-in stipulations.

3. New ULIP guidelines and the effects? The changes and its effects are as under: 1. Lock in for Five Years and Premium Payment Term: Minimum lock-in period has been revised from the current 3 years to 5 years and barring single premium policies, the minimum payment term has also been raised to 5 pay. 2. Increase in Minimum Sum Assured: The minimum sum assured multiple has been increased to 10 times for age at entry below 45 years and 7 times for age at entry above 45 years. At no time can the sum assured be less than 105 per cent of total premium paid including top ups. All top ups also must have life insurance cover built into them. 3. Net Reduction in Yield for Every Year from Year 5: This new guideline stipulates the maximum net reduction in yield every year from 5th year. It is primarily an extension of the earlier stipulation of maximum net reduction in yield of 3% for policy term up to 10 years and 2.25% for policy term above 10 years.

4. 4. Cap on Discontinuance Charge: IRDA has introduced a cap on surrender charge, now termed as policy discontinuance charge, basis the year of discontinuance and annual premium. This allows life insurers to charge only a small penalty on early surrender of policy. • 5. Modifications in Unit Linked Pension Products : Partial withdrawals in Unit Linked Pension products will not be allowed. On maturity, one third of the corpus could be taken as lump sum and rest must be used for buying annuities. This change will ensure a larger corpus is collected and used for retirement planning and not for other life stage needs. IRDA has also made it mandatory that all unit linked pension products must offer minimum guaranteed return which would be specified by IRDA from time to time. Even spread of charges during the lock-in period. The new guidelines stipulate that the overall charges in ULIPs should be spread evenly over the lock-in period of 5 years. • Source: http://www.financialkundali.com/72#.VtrK-X197Dc&gsc.tab=0

5. SURRENDER CHARGES:

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