Ulips | How to keep your insurance beneficial

Benefits of an insurance policy are obtained if your policy is going for the long term. The earlier you buy, the cheaper will be your life insurance premium. If you buy insurance at the right time, you surely don’t want to pass the benefits by missing your premium paying deadline because of a cash crunch or failing to notice.
The Insurance Regulatory and Development Authority (Irda) has provided a standardized window of opportunity for people to make up for late payment. Here under are the current rules regarding Ulips.
Till last year, the rules were vague regarding the revival of Ulips. The company gave you between six months to up to a couple of years to revive your policy on payment of a penalty and a health check-up, if necessary. For a policy less than three years old (earlier, the lock-in period for Ulips was three years), lapsation meant the death benefit (the money the nominee gets in case of the policyholder’s death) would cease while the funds continued to remain invested up till the revival period, making the Ulip a pure investment product. If you paid premiums for at least three years and discontinued thereafter, the death benefit continued as long as the fund value was sufficient to meet the mortality charges—the cost you pay to avail a cover.
But now Irda has allowed treatment of a Ulip like an investment product by streamlining and standardizing the process of lapsation and revival. The rules that now govern Ulips, effective 1st September, give you two options to revive a lapsed Ulip.
1. Pay up the premiums or
2. Let go of your Ulip.
The process is simple. If you are unable to pay your premium by the due date, you will get a grace period—15 days for monthly premiums and 30 days for quarterly or annual payments. If you miss even this deadline, your policy stands discontinued (lapses). After this, you can either revive or surrender the policy. The insurer will send you a notice to this effect within 15 days of discontinuation; you will have 30 days to respond.
Pay up the pending premiums and revive the policy. If you don’t want to do so, the insurer will deduct a discontinuance charge, which can’t exceed Rs6,000 (capped by Irda) and return you the fund value.
If you choose to discontinue before the lock-in period of five years, as mandated by Irda, you will get your discontinuance fund only after five years.
However, in the interim, the discontinuance fund will keep earning a minimum interest of 3.5% per annum. Your policy stands terminated once you get this money back.

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Life Insurance | Health Insurance | Ulips | Term Plan