Now a days, IRDA has rejected any new ULIP plans and has asked to refile it after removing the loan facility clause. It is confirmed by a senior official at a big private life insurance company.
According to Mr. J. Hari Narayan, Chairman, IRDA “Fundamentally, ULIPs are risky products, given that they are linked with the stock market. In case the fund value drops dramatically due to negative price movement, the risk would come to the insurers. Hence, loans against such products are not advisable."
Insurance officials said,''The move might further dent the sales of ULIPs as the loan facility acted as an added feature. The facility first came into force after IRDA raised the lock in period for such plans by 3 years to 5 in September 2010. The loan facility was one of the selling points for these long-term insurance products. So, this would impact the sales of unit-linked plans"
ULIP Loan:
# 2010, September Loans against ULIPs started
# 75% of the fund value could be the maximum loan amount
# Interest rate offered was about 10.75-11% per annum
# Highest loan tenure could equal the policy tenure
# 90% of the fund value can be the maximum loan amount for traditional policies
Traditional plan Loan:
# Loans up to 90% per cent of the surrender value.
# The rate of interest varies from 9.5-12% per annum.
# The loan tenure can be as high as the policy term.
Mr. J. Hari Narayan, also said, "Traditional/ endowment plans are safer products and we have no issues with a loan facility against these plans".
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