What is ULIP?
A Unit Linked Insurance Plan (ULIP) gives investors the benefits of both insurance and investment under a single integrated plan. When an investor purchases units in a ULIP, he or she is purchasing units along with a larger number of investors, just like an investor would purchase units in a mutual fund.
What are the ULIP guidelines?
- Lock-in for Five Years and Premium Payment Term: Minimum lock-in period and the term is 5 years, excluding single premium policies.
- Increase in Minimum Sum Assured: The minimum sum assured multiple is 10 times for age at entry below 45 years and 7 times for age at entry above 45 years. Sum Assured cannot be less than 105 percent of the total premium paid including top-ups.
- Net Reduction in Yield for Every Year from Year 5: The guideline states the impact of charges on the investment over the period of 5 years. At maturity of the policy, this reduction will be a maximum of 3% for policies with terms less than or equal to 10 years and 2.25% for policies with terms above 10 years.
- Cap on Discontinuance Charge: IRDA has introduced a cap on surrender charges, termed a 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 the policy. The cap on discontinuance charge is illustrated below:
| Annualized Premiums Paid | Discontinuance charge (in %) |
| 5 | 4 |
| 6 | 3.75 |
| 7 | 3.50 |
| 8 | 3.30 |
| 9 | 3.15 |
| 10 | 3.00 |
| 11 and 12 | 2.75 |
| 13 and 14 | 2.50 |
| 15 and thereafter | 2.25 |
