Unit linked insurance policies, popularly known as ULIPs,
are life insurance products where life insurance component and investment component are
combined in each product. In this type of policies / plans the investment risk
is borne by the policyholder. In other words, it is the customer who decides
where his money shall be invested.
For each policy there are various investment options like
Risk Fund, Balanced Fund, Debt Fund etc. There is a separate set of IRDA
Regulations on ULIPs. There are single premium and annual premium ULIPs. Every
day Net Asset Value (NAV) is declared for each fund.
In the year 2010 there was some differing legal views about
the ULIPs by SEBI (Securities and Exchange Board of India – the market
regulator) claiming it to be mutual fund and the IRDA (Insurance Regulatory and
Development Authority – the insurance regulator) claiming it to be an insurance
product. The matter was settled by declaring it to be insurance by adding an
explanatory note to Sec.2 (11) of the insurance Act, 1938. This is referred to
in the Post on definition.
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