Charges deducted in ulips - Best Ulip Insurance Policy

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Charges Deducted in ULIPS
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• 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.
•  

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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.
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• 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-
  X197Dcgsc.tab0

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SURRENDER CHARGES
Discontinuance year Annual Premium less than or equal to Rs.25,000 Annual Premium greater than Rs.25,000
1 Least of the following  20 of Annual Premium  20 of Fund Value Rs.3,000 Least of the Following  6 of Annual Premium 6 of Fund Value Rs.6,000
2 Least of the following  15 of Annual Premium 15 of Fund Value Rs.2,000 Least of the following  4 of Annual Premium 4 of Fund Value Rs.5,000
3 Least of the following  10 of Annual Premium 10 of Fund Value Rs.1,500 Least of the following  3 of Annual Premium 3 of Fund Value Rs.4,000
4 Least of the following  5 of Annual Premium 5 of Fund Value Rs.1,000 Least of the following  2 of Annual Premium 2 of Fund Value Rs.2,000
5 Nil Nil
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