Wednesday, 15 July 2015

Changes in Unit Linked Insurance Policies Impact Finances Positively

IRDA has planned few major changes in the way ULIP’s would be sold to the buyers. Industry experts will give you detailed information about updated insurance policy riders. These changes will affect insurance policy benefits. Below are some important changes which could modify the way Unit Linked insurance plans work from now on:
IRDA has announced a cap on charges like surrender charges. Make sure that surrender charges cannot be more than Rs 6,000 in the first year from now on. These charges are capped at around Rs 2000 during the fourth year and in the fifth year, these charges will not applicable. Plus, the cost structure of Indian insurance policy would change which means more of policyholder’s invested amount will actually be invested so that insured get more return.
For insurance agents, maximum limit of commission in India would be around 15 percent for first year, then 7.5 percent for second year and five percent from thereon. It would be just the same as was mentioned for traditional Indian insurance policy.
Higher Sum Assured
Now, the least sum assured in case of ULIP’s has been nearly ten times the sum assured. Remember that higher cover is always beneficial to the policyholders, more so if it is sold at an affordable rate.
Longer lock-in Periods
For ULIPs, the minimum lock-in period has been increased to five years from three years. Due to longer lock-in periods, person remains insured for a longer tenure and thus, avoids pre-mature withdrawals.
Ban on Products
IRDA has enforce a ban on ‘Highest NAV Guaranteed’ plans because people believe that it would make double within certain years of investment and investors would get the highest NAV that would double the investment in no time. But, the commissions and charges never took the NAV anywhere near to that level.
Best ULIP Insurance Plan  have become better with such changes. But, it is still advisable to select a pure term insurance for security and pick a mix of bonds, mutual funds and deposits for investments.
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