5 changes in ULIP rules and how it benefits you

A Unit Linked Insurance Plan (ULIP) was previously known only for its high charges amongst many investors. Today, a ULIP Plan can be a beneficial investment after specific changes proposed by the Insurance Regulatory and Development Authority of India (IRDAI). An investment in a ULIP Plan would allow you to gain returns based on your risk appetite. Moreover, you can obtain a fixed maturity amount along with a bonus during the tenure of the ULIP Plan.

After IRDAI made the top 5 changes in ULIP rules, a ULIP policy offers several ULIP benefits for each individual. Therefore, let’s take a look at these changes given below for a better understanding:

1. An increase in the revival period up to 5 years

When you skip the premium payment, your insurance company might provide you with a specific period within which you should pay the premium. The period offered by your insurer is known as the revival period. Under a ULIP Plan, the revival period is extended up to 5 years as per the new rules set by the IRDAI. The extension in the revival period not only offers a wider window for a revival of the ULIP policy but also provides flexibility in the premium payment.

2. A reduction in the minimum death benefit value

The death benefit, which was ten times, previously is reduced to seven times after the IRDAI made changes. As a policyholder, if you wish to avail the tax benefits, the death benefit should be ten times the annual premium according to Section 80C of the Income Tax Act, 1961.

3. Provision of riders along with a ULIP policy

Riders or add-on covers are additional benefits offered by your insurer to enhance the base policy. Initially, insurers availed a ULIP policy to all the policyholders by making use of riders on top of the units held. Ever since IRDAI made new ULIP rules, you should pay a high premium to purchase a rider like a critical illness rider or an accidental death rider.

4. A fixed sum against the surrender of the ULIP policy

When you decide to discontinue your ULIP insurance after two years, you might receive guaranteed surrender value up to 30%, which is a pre-decided amount. If the surrender is effected between the 4^th or the 7^th year, you can obtain 50% of the amount. This is the case only for all the non-linked life insurance products.

5. NPS and insurance pension products are similar

Under ULIP pension plans, you can withdraw an amount up to approximately 25% of the fund value to fulfill your life goals like child’s wedding or education, purchase a new home or to treat critical illness. For pension products, you are also eligible to get an option for commutation up to over 60%. If you might require a lump-sum amount during retirement, you can withdraw a specific proportion of money as a lump sum.

Conclusion:

In a nutshell, the IRDAI has made these five changes as highlighted above for the betterment of many investors after a hiatus of nine long years. The changes have not only been made for ULIPs but also non-linked products like traditional life insurance plans. Today, a ULIP Plan is more structured to favor all the customers. With their present structure, ULIPs prove to be an excellent investment for all long-term investors.