Surrender ICICI Elite Life to curb losses here itself. You will make losses but you don't have another way out
10-Sep-2015 •Research Desk
I have already paid one installment of ₹3 lakh in ICICI Elite Life II Plan. I was given false assurances and not told about the lock-in period despite asking specific questions about it. I want to get out of the plan. What should I do now?
- Dr. Abhijeet Birari
ICICI Pru Elite Life II is a unit linked policy which is a mix of insurance and investment. You have bought life cover of 30 lakh rupees by paying 3 lakh premium. Apart from insurance, this policy also acts as an investment vehicle. On this portion, the expenses charged by the insurer are high. The Premium Allocation charge is four per cent for the initial five years. The charge then reduces to 2 per cent from the 6th year onwards. Besides the Premium Allocation charge, Fund Management charge stands at 1.35 per cent annually and Policy Administration expense at ₹4,800 a year under regular pay option (annual premium pay option). This policy is not recommended as it is quite expensive.
Surrender this plan to curb losses. Once you surrender, you will have to incur a surrender penalty (lower of 6% of AP or FV), subject to a maximum of ₹6000.
If you surrender a ULIP before maturity, you will have to forego all tax benefits claimed earlier. All deductions claimed earlier will get reversed and you will have to pay tax as per applicable slab rate. As per the new section 194DA of IT Act (effective from 1st October 2014), if policy proceeds for a year exceed ₹1 lakh, then tax will be deducted at source as under:
At 2% (for valid PAN registered)
At 20% (for valid PAN not registered)
You will have to pay extra taxes while filing ITR