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The Insurance Regulatory and Development Authority (IRDA) has announced a few changes in the guidelines for unit-linked insurance products (ulips). As per the latest circular, all unit-linked insurance policies must now come with a minimum policy period of five years. Also, it has directed companies to launch unit-linked pension or annuity policies with a life cover. Until now, life cover was optional for unit-linked pension policies. "All linked products including pension/annuity products must have a minimum sum assured payable on death. In case of unit-linked products providing health insurance cover, the provision of death benefit is not mandatory," stated the circular.The latest directive mandating a life cover on unit-linked pension policies will translate into lower maturity proceeds and expensive pension policies. "Investors will get a life cover on pension polices now but at a cost. Since IRDA mandates a minimum sum assured equal to 5 times the annual premium, customers will have to shell out a little more to pay for the mortality charges. Therefore, say if your maturity proceeds were Rs 1,000 at the end of 30 years, it would now be lower than that," said Rajesh Rajput, director - products, Aegon Religare Life Insurance.Besides this, the regulator has barred investors from making any withdrawals from pension policies. "It is a step in the right direction as it will ensure financial discipline in investors and also a better corpus at retirement," said IDBI, chief executive officer, G V Nageswara Rao. However, in case of life insurance policies, partial withdrawals will be allowed after five years."We support IRDA's intent in bringing more focus on life protection and long-term accumulation across Ulips. We've reviewed our product portfolio, and will be making the required changes to be fully compliant with the new guidelines before the July deadline," said Rishi Mathur, head (products), Bharti AXA Life Insurance.
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