The insurance business in India isn’t just growing, but also becoming more sophisticated in terms of product offerings. To help readers keep ahead of developments in this business, Mint features a Q&A on insurance every Monday.
I am planning to buy a unit-linked policy. However, I have read about the new guidelines on cap on charges by the regulator. Will it affect my returns?
Last week, the regulator announced new guidelines, defining a cap on charges for unit-linked insurance plans (Ulips). This is a positive step towards making Ulips even more transparent and favourable for customers. With a cap on overall charges, customers stand to benefit in the form of higher returns on their investment.
Moreover, lower charges on products with a term greater than 10 years will provide further impetus to long-term policies.
For example, if you have bought a product with a term greater than 10 years, keeping in mind the 10% standard illustration, your return cannot be less than 7.75% and for a term less than 10 years, your return cannot be less than 7%.
How much does life insurance cost? How are premium rates decided?
In order to buy a life insurance policy, you need to pay premiums to the life insurance company. The amount of premium payable depends upon the type of policy, term of policy contract, sum assured and your age. You could pay these premiums monthly, half-yearly, annually, or as a single premium.
Readers are welcome to write in with their queries to firstname.lastname@example.org. The questions will be answered by senior executives from leading insurance firms.
This week’s expert is T.R. Ramachandran, managing director and CEO, Aviva India.