New Tax Code may boost long-term life policies

New Delhi: Long-term life insurance policies are expected to grow in popularity if the EET (exempt exempt tax) regime under the proposed Direct Tax Code comes into force by 2011. According to G.V. Nageswara Rao, Managing Director and CEO, IDBI Fortis Life Insurance, customers would choose long-term policies if the government decides to tax the final total sum of matured policies.

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"Though raising tax exemption limit to 3 lakh is a good thing, because of EET, I expect that people will tend to keep policies till retirement, as then they will fall under a much lower tax slab. Long-term insurance policies, with terms of 20 or 30 years, are bound to get more attractive," Rao said. IDBI Fortis, which has just launched a new plan on the traditional format called 'Incomesurance,' feels that after the financial crisis the proportion of unit linked insurance plans (ULIPs) may fall compared to traditional policies, reports Business Line.

Following the experience of the last year, when the markets were bearish, customers now prefer more secure and low-risk plans with guaranteed returns. "Currently, our product mix has 70 percent ULIPs and the remaining 30 percent traditional policies, which is similar to the industry. However, as we launch more traditional products, the mix of such policies will go up by a tad," said Rao.

The company, which is capitalized at 450 crore after 250 crore infusion in March, collected 193 crore in premium in the first half of the fiscal. It has around 1.3 lakh policyholders and plans to have 100 branches and double the number of agents by the next fiscal.