Life cover in ULIPs

On the Ulip front, the minimum cover offered has been reduced to seven times the annual premium from ten times to those under 45. At present, insurers have to offer a minimum cover of 10 times the annual premium to those under 45 and seven times to those over 45.

A higher proportion of premiums will be directed towards investments. However, it is important to note that to maximize tax benefits under Sec 80C and 10(10D), the life policy has to offer a cover of at least 10 times the annual premium. For policies with 7 times cover multiple, tax breaks under 10(10D) is not applicable.

Maximum lump sum withdrawal

In respect of pension products, the maximum withdrawal allowed at maturity has been increased from one third to 60%. However, this will not bring insurance pension plans at par with the National Pension System (NPS). In NPS, the 60% withdrawal allowed at maturity is tax free. In pension plans, 60% withdrawal is allowed now but withdrawal of upto one third would be tax-free.

Shorter period to acquire surrender value

You are not required wait 3 years for your policy to acquire a guaranteed surrender value. At present, if you surrender your policy during the 3rd year, you are entitled to 30% of premium paid (minus any survival benefits if already paid). The new rules have brought down the period to two years. If you have paid two premiums, the policy will pay 30% of the premium.

Flexibility to reduce premium

"The regulations also provide policyholders the flexibility to reduce their premium after the fifth policy year,” says Tarun Chugh, MD and CEO, Bajaj Allianz Life. Being long-term products, insurance premiums have to be serviced annually and any financial crunch around the premium paying date can result in policy lapsation. Instead, now you can reduce your premiums by 50% and still keep the policy in force.

Extended revival period

The revival period has been extended to five years in case of non-linked products and three years in case of unit-linked products from the current two years. The revival period is the period offered by insurers to revive the policy after you missed paying the premiums after the policy.lapses and also during the grace period. You will get some flexibility in policy premium payment with the increase in duration.