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Union of India - Section

Section 27 in Insurance Regulatory and Development Authority of India (Unit Linked Insurance Products) Regulations, 2019

27. The charges levied under the Unit Linked insurance products shall be.

(a)Premium Allocation Charge: This is a percentage of the premium appropriated towards charges from the premium received. For Unit Linked insurance products, the balance amount known as allocation rate constitutes that part of premium which is utilized to purchase the units of the fund in the policy. The percentage shall be explicitly stated and could vary by the policy year in which the premium is paid, the premium size and the premium type (regular, single or top-up premium).(i)This is a charge levied at the time of receipt of premium.(ii)The maximum premium allocation charge shall be declared by the Authority from time to time. The current Premium Allocation Charges is capped at 12.5% of Annualized premium in any year.(b)Fund Management Charge (FMC):(i)For Unit Linked insurance products, this is a charge levied as a percentage of the value of assets and shall be appropriated by adjusting the Net Asset Value.(ii)This is a charge levied at the time of computation of NAV, which is usually done on daily basis.(iii)The maximum Fund Management Charge shall be declared by the Authority from time to time. The current cap on fund management charges in respect of each of the segregated fund is 135 basis points.(c)Guarantee Charge:(i)For Unit Linked insurance products, this is a charge levied as a percentage of the value of assets and shall be appropriated by adjusting the Net Asset Value.(ii)This is a charge levied at the time of computation of NAV, which is usually done on daily basis.(iii)The maximum Guarantee Charge shall be declared by the Authority from time to time. The current cap on guarantee charges is 50 basis points.(d)Policy Administration Charge: This charge shall represent the expenses other than those covered by premium allocation charges and the fund management charge. This is a charge which may be expressed as a fixed amount or a percentage of the premium or a percentage of sum assured.(i)For unit fund, this charge is levied at the beginning of each policy month from the unit fund by cancelling units for equivalent amount.(ii)This charge could be flat throughout the policy term or vary at a pre-determined rate, subject to an upper limit as decided by the Authority from time to time. The current cap is 5% per annum.(iii)The maximum Policy Administration Charge shall be declared by the Authority from time to time. The current cap on policy Administration charge is Rs 500 per month.(e)Surrender Charge or Discontinuance charge:(i)This is a charge levied on the unit fund where the policyholder opts for complete withdrawal of the contract as stipulated in Regulation under these Regulations.(ii)This charge is usually expressed either as a percentage of the fund or as a percentage of the annualized premiums (for regular premium contracts).(iii)No discontinuance charges shall be imposed on top-up premiums.(iv)The charges levied on the date of discontinuance (as a percentage of Fund Value or one annualized premium or a percentage of single premium) shall not exceed the limits as decided by the Authority from time to time. The current limits are given below:
(1)For annual premiums:
Where the policy is discontinued during thepolicy year Maximum Discontinuance Charges for thepolicies having annualized premium up to Rs. 50,000/- Maximum Discontinuance Charges for thepolicies having annualized premium above Rs. 50,000/-
1 Lower of 20% * (AP or FV) subject to a maximumof Rs. 3000 Lower of 6% * (AP or FV) subject to a maximum ofRs. 6000
2 Lower of 15% * (AP or FV) subject to a maximumof Rs. 2000 Lower of 4% * (AP or FV) subject to a maximum ofRs. 5000
3 Lower of 10% * (AP or FV) subject to a maximumof Rs. 1500 Lower of 3% * (AP or FV) subject to a maximum ofRs. 4000
4 Lower of 5% * (AP or FV) subject to a maximum ofRs. 1000 Lower of 2% * (AP or FV) subject maximum of Rs.2000
5 and onwards Nil Nil
(2)For Single premium policies:
Where the policy is discontinued during thepolicy year Maximum Discontinuance Charges for thepolicies having Single Premium up to Rs. 3,00,000/- Maximum Discontinuance Charges for thepolicies having Single Premium above Rs. 3,00,000/-
1 Lower of 2% *(SP or FV) subject to a maximum of Rs.3000/- Lower of 1% *(SP or FV) subject to a maximum of Rs.6000/-
2 Lower of 1.5% *(SP or FV) subject to a maximum of Rs. 2000/- Lower of 0.70% *(SP or FV) subject to a maximum of Rs. 5000/-
3 Lower of 1% *(SP or FV) subject to a maximum of Rs.1500/- Lower of 0.50%* (SP or FV) subject to a maximum of Rs. 4000/-
4 Lower of 0.5% *(SP or FV) subject to a maximum of Rs. 1000/- Lower of 0.35% *(SP or FV) subject to a maximum of Rs. 2000/-
5 and onwards Nil Nil
AP- Annualized Premium
SP-Single Premium
FV- Fund Value
(f)Switching Charge: This is a charge levied on switching of monies from one segregated fund to another available within the product. The charge per each switch, if any, shall be levied at the time of executing the switch. The maximum Switching Charge shall be declared by the Authority from time to time. The current cap per switch is Rs.500.
(g)Mortality or Morbidity Charge: This is the cost of life or health insurance cover. It is exclusive of any expense loadings levied by cancellation of units. This charge, if any, shall be levied at the beginning of each policy month from the fund.
(i)The method of computation shall be explicitly stated in the policy document. The mortality or morbidity charge table shall form part of the policy document.
(ii)Mortality charge table shall be guaranteed during the contract period and morbidity charges may be reviewed during the term of the policy, as per the IRDAI (Health Insurance) Regulations, 2016 or any other circular or guidelines which may be issued by the Authority from time to time.
(iii)The mortality or morbidity charge for the mortality or morbidity risk covered shall:
(1)only reflect the pure risk charges for the cover offered and shall not include any allowance for expenses or any other parameters.
(2)be reasonable and consistent with the prescribed mortality tables or morbidity tables, if any.
(3)be demonstrated with the support of insurer's own experience, wherever applicable.
(4)be expressed as per Rs.1000 Sum at risk for each age.
(h)Rider charge or Rider Premium:
(i)Within a product, cost of rider cover can be levied through rider charge or level rider premium, but not both. This should be explicitly mentioned in policy document & other filing documents.
(ii)Riders as approved by the Authority can be attached to the Unit Linked insurance products provided:
(1)the rider premium does not contain any expense loading and
(2)the premium payment term and policy term of the riders are consistent with premium payment term and policy term of the base Unit Linked insurance product.
(3)The level rider premium shall be levied in addition to the base premium.
(iii)In case the rider cost is levied through charge, such charges shall be exclusive of expense loadings and levied separately to cover the cost of rider benefit. The rider charge, if any, shall be levied by cancellation of units. This charge is levied at the beginning of each policy month from the fund. The rider charge table shall form part of the policy document. The rider charge shall be expressed as per Rs.1000 Sum Assured for each age.
(i)Partial withdrawal charge: This is a charge levied on the unit fund at the time of part withdrawal of the fund during the contract period. The maximum Partial withdrawal charge shall be declared by the Authority from time to time. The current cap on partial withdrawal charge is Rs 500 per transaction.
(j)Miscellaneous charge:
(i)This is a charge levied for any alterations within the contract, such as, increase in sum assured, premium redirection, change in policy term etc. The charge is expressed as a flat amount. This shall be levied by cancellation of units.
(ii)This charge is levied only at the time of alteration. The maximum Miscellaneous charge shall be declared by the Authority from time to time. The current cap on alteration charges is Rs. 500 per alteration.