IRDAI has issued a circular in which it has allowed policyholders to renew their lapsed ULIP schemes within two years of such policies getting lapsed. This has come into force with immediate effect.
Simply put, insurance companies will have to reverse the discontinuance charge if a policyholder chooses to revive her lapsed policy. Typically, life insurers move money to the ‘discontinuance fund’ on non-receipt of premium after the due date. They levy a discontinuance charge from the premium which ranges from Rs. 2,000 to Rs. 6,000 based on the number of years the premium was paid.
However, insurers can deduct upto 50 bps as fund management charge.
The insurance regulator has said, “The policyholder shall have the right to revive such policy within two years from the date of discontinuance irrespective of the end of the lock-in period.”
The life insurance industry manages assets of Rs. 3.62 lakh crore under ULIPs as on March 2015.