Irda raises lock-in period for Ulips to five years

In a late evening circular, Irda said it has increased the lock-in period for all Ulip products from three years to five years, including top-up premiums, thereby making them long term financial instruments which basically provide risk protection.

Irda also said all regular premium / limited premium Ulips shall have uniform and level paying premiums. Which means that any additional payments shall be treated as single premium and they will have to have insurance cover. All limited premium unit linked insurance products, other than single premium products, shall have premium paying term of at least 5 years. It made it mandatory that the insurers shall distribute the overall charges, in Ulips in an even fashion during the lock-in period.

To make sure that all unit linked products, other than pension and annuity products, provide a minimum mortality cover or a health cover, Irda specified that the  minimum mortality cover should be at least 125 per cent of single premium for age at entry below 45 years and 110 per cent of single premium above 45 years. In case of regular premium contract the mortality cover should be 5 times the annualised premiums or Rs 100,000 per annum whichever is higher for entry age up to 45 and for entry age above 45  it should be 5 times the annualised premiums or Rs 75,000 per annum whichever is higher.

Irda has also specified that in case of the accumulated fund value of unit linked pension/annuity products a minimum guaranteed return of 4.5 per cent per annum (or as specified by Irda from time to time) must be offered on the maturity date. This guaranteed return is applicable on the maturity date, for policies where all due premiums are paid.  In the case of unit linked pension / annuity products, no partial withdrawal shall be allowed during the accumulation phase and the insurer shall convert the accumulated fund value into an annuity at the vesting date. However, the insured will have an option to commute up to a maximum of one-third of the accumulated value as lump sum at the time of vesting.