ULIP products turns attractive

Insurance Regulatory and Development Authority (IRDA), imposing a cap on the charges that insurers levy on customers.ULIP and Mutual fund products have similar investment strategy but charges in ULIP are higher in compare to Mutual fund.
ULIPs are now likely to become more competitive than mutual fund products.

Currently, mutual funds are allowed to charge up to 2.5 per cent of assets under management under various heads as fees. With the cap on ULIP charges, insurers will soon offer products with a built-in mortality at just about 2.25 per cent, since most insurance products are long-term contracts.
According to the new regulation, the charges on yield will be capped at 300 basis points for a product with tenor of less than or 10 years duration, of which fund management charges shall not exceed 150 basis points. For other contracts that are above 10 years, the difference between gross and net yields shall not exceed 225 basis points, of which the fund management charges shall not exceed 125 points.

The new regulation will be effected from October 1, for all products approved by the regulator after this date and all the existing products that do not meet the requirements should be withdrawn or modified by December 31.