What are Index-linked Insurance Policies (ILIPs) ?

Index-linked Insurance Policies (ILIPs):

A committee was set up by the Insurance Regulatory and Development Authority of India (IRDAI) on the request of some insurers. The committee has recommended introducing index-linked insurance policies (ILIPs).

Index-linked insurance policies (ILIPs):

  • The returns coming from the ILIPs will be linked to benchmark indices.
  • ILIPs are the Insurance products linked with the benchmark indices.
  • It includes a 10-year Sovereign Bond Index, Sensex or Nifty, etc.
  • The ILIPs linked with the government bonds are less risky while those linked with the equity-based indices will go through the fluctuation in returns in accordance with the stock market performance.
  • ILIPs are the alternative or complementary option to the current conventional guaranteed products such as annuities and savings products.
  • It can also be used as unit-linked insurance plans (ULIPs) with respect to the volatile markets and stressed interest rates.
  • The ILIPs can be regarded as a life insurance policy under Section 10(10D) and taxability of the Insurance Policy Act.

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