The Insurance Regulatory and Development Authority (IRDA) has spelt out guidelines for unit linked insurance products (ULIPs) and conventional policies.

ULIPs cover only the life risk unlike conventional policies wherein the policyholder gets covered for his life as well as investment risks. Investment in unit-linked plans is risky. By investing in the funds the policyholder is becoming a part of the stock market, which is subject to fluctuations and the performance of the market is unpredictable.

The industry sources have pointed out that around 75 per cent of the premium income comes from ULIPs. The tax benefits, which are available under conventional policies, are also extended to unit linked plans. The IRDA has issued new guidelines for ULIPs wherein one of its factors mentions that the investment plans should maintain a minimum lock in period. Failing to abide by this rule, IRDA asked Bajaj Allianz to withdraw its unit linked plan because of its short-term component.

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