Latest ULIP News

Proceeds from ULIP ravaged by declining markets? Take phased payouts to recoup

The pandemic-driven market crash could not have come at a worse time for ULIPS whose policies are due to mature soon. After waiting for a long period of 10-15 years to produce wealth for their long-term goals such as retirement and education for children, they have to face the prospect of a significant erosion in their maturity revenues.

As market-linked investments, the net asset value (NAV) of ULIP funds as at the date of maturity will decide your total corpus. But it is possible that the pandemic-induced market turmoil has left the valuation of this fund battered and bruised. However, to give some relaxation to such policyholders, the IRDAI has stepped in. It requested life insurers to allow a phased settlement option to mature until May 31, 2020 for all ULIPS.

- January 29, 2021

Understand what has been changed in recent ULIP regulations by IRDAI

IRDAI has made it compulsory for all insurance firms to obtain the guidelines with effect from February 2020 in order to enforce them on time, replacing the earlier circulars on the issue. The change is a clear attempt to improve accountability and curb the mis-selling of ULIPS, while ensuring that all the relevant product-related information is given to policyholders.

Furthermore, IRDAI emphasizes the justification for enforcing these conditions by stating: given that ULIP is basically a long-term financial instrument, it is very important to provide a fair and open selling process with appropriate disclosures in order to ensure good consumer performance and to protect the public insurance interests. It has also been made clear that current goods would also have to be updated to comply with the new legislation within a fair period of time. In the long run, the move would prove very beneficial for the industry.

- January 24, 2021

Insurers see a boost in the abandonment of policies

People have begun to borrow against life insurance policies more than ever. Another blow to insurers that are already fighting low new premium collections is the rising cases of policy surrender.

While the pandemic continues to rage, ULIPs are giving up their life cover at a rapid rate in the midst of wage cuts, job losses and general economic uncertainty.  The 13 per cent  ratio in the June quarter, which calculates how long an insurer retains insurance, decreased by an average of nearly 10 per cent points from a year earlier. The massive drop clearly suggests that many clients did not renew policies after paying the premium for the first year. Personal safety and guarantee products, which have a comparatively smaller ticket size than ULIPs, are now driving the growth of the industry. Owing to the cyclical weakness in ULIPs sales due to weak capital markets, Equity ULIPs remain a drag on growth.

- January 19, 2021

Budget 2021: What do you pay tax on?

The new budget proposed key changes for individual investments. The change imposes tax on high investments investment in two key ways.

As per the new amendments proposed in the budget, the maturity amount from ULIPs with an annual premium that goes above Rs. 2.5 Lakhs would now be subject to tax deduction. Not just this, if you earn interest on Employees' Provident Fund, exempted PF Trusts or Voluntary Provident Fund having an employee contribution of more than Rs. 2.5 Lakhs annually will also be taxable. Hence, in case of high premium ULIPs or big PF contributions, individuals must be ready to pay tax.As market-linked investments, the net asset value (NAV) of ULIP funds as at the date of maturity will decide your total corpus. But it is possible that the pandemic-induced market turmoil has left the valuation of this fund battered and bruised. However, to give some relaxation to such policyholders, the IRDAI has stepped in. It requested life insurers to allow a phased settlement option to mature until May 31, 2020 for all ULIPS.

- February 16, 2021

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