As per Insurance Regulatory and Development Authority (IRDA) Unit-Linked Insurance Plan (ULIP) offered by life insurers which promises that customer will get guaranteed highest Net Asset Value (NAV) return that the policy has achieved during the tenure of the policy have caused confusion among the customers hence it should be discontinued.
It is different from other highest NAV guaranteed plans as it guarantees only 80% of the NAV take for instance if the NAV of the plan rises to Rs 20 from Rs 10 than only Rs 16 is guaranteed.
As per IRDA product is leading to miscommunication as customers believes that return will be high as it guarantees highest NAV return but return are even low than pure equity fund. But insurers say that returns are not poor but are based on market conditions.
Highest NAV guaranteed schemes guarantees returns based on highest NAV that the policy has achieved during the term of the policy. This product is a close ended scheme sold by companies for limited period from 3-6 months. This product has lock-in period of 7-10 years.
Highest ULIP NAV guarantee plans typically invest its fund in debt and equities; as and in order to protect the guarantee in the case of falling equity market insurers move funds from equities to debt. Hence it eventually becomes a debt product and customers are not able to get benefit of the rising equity market.