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Current ULIP Guidelines, Benefits, and Impact on existing ULIP policies

A Unit Linked Insurance Plan (ULIP) gives investors the benefits of both insurance and investment under a single integrated plan. When an investor purchases units in a ULIP, he or she is purchasing units along with a larger number of investors, just like an investor would purchase units in a mutual fund.

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Last Updated - May 12, 2023
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What is ULIP?

A Unit Linked Insurance Plan (ULIP) gives investors the benefits of both insurance and investment under a single integrated plan. When an investor purchases units in a ULIP, he or she is purchasing units along with a larger number of investors, just like an investor would purchase units in a mutual fund.

What are the ULIP guidelines?

  • Lock-in for Five Years and Premium Payment Term: Minimum lock-in period and the term is 5 years, excluding single premium policies.
  • Increase in Minimum Sum Assured: The minimum sum assured multiple is 10 times for age at entry below 45 years and 7 times for age at entry above 45 years. Sum Assured cannot be less than 105 percent of the total premium paid including top-ups.
  • Net Reduction in Yield for Every Year from Year 5: The guideline states the impact of charges on the investment over the period of 5 years. At maturity of the policy, this reduction will be a maximum of 3% for policies with terms less than or equal to 10 years and 2.25% for policies with terms above 10 years.
  • Cap on Discontinuance Charge: IRDA has introduced a cap on surrender charges, termed a 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 the policy. The cap on discontinuance charge is illustrated below:
Annualized Premiums PaidDiscontinuance charge (in %)
54
63.75
73.50
83.30
93.15
103.00
11 and 122.75
13 and 142.50
15 and thereafter2.25
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Jay Vasa is a content writer, who has got his core emphasis on insurance related information. The sole motive of writing articles is to spread appropriate information to the people regarding one of the important and discussed topic in today's time.