Life Insurance cover is must for ULIP : IRDA

Insurance regulator Irda, , has reemphasized that insurers should offer assured life insurance cover with Ulips.
Reiterating its December 2005 order on Ulips, Irda in an order late Monday night said: "All Unit linked Insurance products (Ulips), including pension/annuity products must have a minimum assured sum payable on death."Irda, however, clarified that provision of death benefit will not be mandatory in case of unit linked products providing health insurance cover.
Ulips, it further said, cannot be used to obtain loans. "No loan shall be granted under Unit Linked Insurance Products."
Irda further said that minimum policy term would be five years in the case of individual products, while the group products would continue to be renewed annually.
Partial withdrawal from the policies, Irda said, would be allowed only after the fifth policy anniversary for all unit linked products, except pension or annuity products.
In the case of unit linked pension or annuity products, no partial withdrawal will be permitted and the insurer will be allowed to convert the accumulated fund value into an annuity only at maturity.
Every top-up premium will have a lock in period of three years from the date of payment of that top-up premium, it said, adding they will not be allowed during the last three years of the contract.
The revised norms, Irda said, will come into effect from 1 July, 2010.
It seems IRDA finally realized that without above conditions, ULIPS are just like Mutual Funds. It can't defend it's jurisdiction in the supreme court. ULIPS are neither a good investment product nor a good insurance product. From the returns perspective, ULIPS are not the best and so investors should stay away from them. In case you need life insurance cover then  go for term insurance that too online. In case you plan to exit Ulips before the completion of five years, then you shall be liable to pay tax on all the deductions claimed against the premium paid till the year of termination. You will also have to pay a high surrender charge.


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