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:
- 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.
- 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.
- 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.
- 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 4th or the 7th year, you can obtain 50% of the amount. This is the case only for all the non-linked life insurance products.
- 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.
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.