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Guide to understand impact of changes in insurance, MF and banking sectors
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Starting today, a slew of rules are set to come into effect over the next three months, changing the way financial products are perceived. Here’s a handy guide to help you understand the significant changes which will have a direct bearing on your finances.
Insurance
Measure: Insurers cannot front load costs
Effective date : September 1
Impact: Policyholders who have to exit early (after the 5th year) will not lose a large chunk of their investment to charges as they did in the past.
Measure : Three-year lock-in period for all Ulips increased to five years
Effective date : September 1
Impact: Insurers cannot sell Ulips as short term plans.
Measure: Minimum cover doubled on all life ulips
Effective date: September 1
Impact: Out of every Rs 100 invested in Ulips, a larger component will go towards life insurance.
Measure: Stipulation of 4.5% guaranteed return on pension and annuity plans
Effective date: September 1
Impact: Insurers will direct major part of the investments to safe avenues like government securities, reducing the scope for earning higher return from equity-oriented products.
Measure: All limited premium unit-linked insurance products, other than single premium products, shall have premium paying term of at least 5 years
Effective date: September 1
Impact: Insurers cannot position Ulips as mutual funds. Policyholders can look forward to better returns as regular premium payment with the cap on charges will compound returns better.
Mutual funds
Measure: NFO (new fund offer) subscription period reduced from 30 days to 15 days, except for equity-linked saving schemes).
Effective date: July 1
Impact: The time taken to process applications will decrease. The truncated subscription period will mean that unsuccessful applicants will get their refunds faster.
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