IRDA Planning To Announce Change In ULIP Structure

Unit Linked Insurance Plans (ULIPs) are the products which give you access to both investment and insurance. These plans let you enjoy a life cover along with the opportunity of earning market linked returns. Insurers are likely to change the structure of ULIPs with the provision of offering a higher life cover to qualify the benefits of tax.

That means, once the Direct Tax Code (DTC) comes with the guideline of changing the product structure, then Ulips will be more of an insurance product, making the returns on investment go down and increasing the insurance cover. This kind of change in product will make Ulips more protection oriented and less savings oriented.

Under current regulatory guidelines, insurance companies are offering minimum cover of 10 times the premium paid in an year. However, insurers are planning to offer minimum cover of 20 times the premium paid and where the annual premium paid does not exceed 5% of the capital sum assured will qualify for the tax benefits as specified under the DTC.

In 2010, there was a clash between SEBI and IRDA regarding the issue of Ulip structure. Insurance companies with the primary orientation of providing insurance protection with Ulips were more concentrated towards the investment and have sold Ulips as investment products. Later, this issue was then resolved by the government and the insurance regulator have brought several changes to the Ulip structure.

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