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Investors, who have put their money into unit-linked insurance policies (Ulips), now have some additional guidelines affecting the situation that they will face when they discontinue the policy. This will help them with the fact that they will be able to proceed with the various steps related to the policy in a systematic manner with adequate knowledge.
Here are some of the factors that will play a role in the entire issue.
Grace period:
One of the points that the investor has to consider is the grace period that they will actually receive for the unit-linked policy. This is the time period that is available after the date of the premium payment when the cover will remain in effect. For a policy, where the premium paying term is monthly, the grace period has to be 15 days and for the other policies this has to be 30 days. This time period has to be provided to ensure that the investors are able to keep the policy running.
Choices and procedure:
There are two things that a policyholder can do while discontinuing a policy. This is an important step, as it determines the choices available for the individual. One of this is to actually revive the policy, which means that things will be restored to their previous level, while the other thing is to actually withdraw the amounts that are present on the policy. The procedure that will be followed when the policy is under the grace period is important, as this will determine a lot of things. During this time period, the existing risk cover with the other conditions will continue and if the policy is revived, then the amounts that are present in the policy, less the applicable charges will be available for the individual for the purpose of continuing with the investments.
Restriction:
While there is a facility that is provided for the purpose of complete withdrawal from the policy, there are some conditions that will need to be fulfilled while this is being done. One of them is that there is a lock-in period of five years for the unit-linked policy; so, if there is a decision to completely withdraw from the policy, then this cannot be in violation of this provision. What this means is that the amount will be kept aside but it cannot be given back till the lock-in period is over.
The other situation is where there is a pension policy. In such a situation, the insurance company will be able to refund only one-third of the total amount, as this is in line with the regulations. Further, the remaining amount has to be used for the purpose of purchasing an annuity in line with the overall conditions.
Discontinuation charges:
There are certain discontinuation charges that have to be paid and, hence, these have to be computed in a manner that is fair. So, there are certain guidelines that will need to be followed. The charges have to be in tune with the overall guidelines, plus they should actually encourage the policyholder to continue with the policy.
In terms of the absolute amounts this cannot exceed Rs 6,000 for policies with annual premium over Rs 25,000 or Rs 3,000 for policies with premium less than this amount, if the withdrawal is in the first year and the maximum figure will reduce when it is made in the period after this. There will not be any discontinuation charges from the fifth year onwards.
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