IRDA caps charges for ULIPs

New Delhi: IRDA, the Insurance regulator on Wednesday put a cap on overall charges that life insurance companies can levy on subscribers of their Unit Linked Insurance Policies (ULIPS). In order to enable the customers to have a clear understanding of the product and to comprehend various features of ULIPs, it is decided that IRDA will prescribe one cap on all charges put together. This will also impart the flexibility for the insurers and encourages further innovation of product.

For those products, which have maturity of 10 years, the insurance companies have to maintain the difference between gross yields and net yields at 300 basis points.

For insurance products which are of a tenor of less than or equal to 10 years duration, the difference between gross and net yields shall not exceed 300 basis points, of which fund management charges shall not exceed 150 basis points. However, for other contracts, i.e., those whose contract period is more than 10 years, the difference between gross and net yields shall not exceed 225 basis points, of which the fund management charges shall not exceed 125 basis points.

Justifying lower cap on charges for longer term insurance ULIPs, IRDA said in a circular here, "Insurance products are long term saving vehicles and the policy prescriptions should help the customers' to move towards long term savings cum protection rather than short term one."