IRDAI Life Insurance Products Master Circular 2024: Three-Year Revival Window and the 90% ULIP Illustration Rule
IRDAI/ACTL/MSTCIR/MISC/89/6/2024 forces ULIP illustrations to show at least 90% of premiums back at 4% gross and grants a three-year revival window. Here is the arithmetic and the traps.
In June 2024 the Insurance Regulatory and Development Authority of India (IRDAI) issued the Master Circular on Life Insurance Products, reference IRDAI/ACTL/MSTCIR/MISC/89/6/2024. In one document it consolidated and repealed four earlier circulars, folding the rules on benefit illustrations, discontinued policies and product transparency into a single reference point for every life insurer operating in India. Two provisions inside it change how much a policyholder can expect to get back and how long a stopped policy can be resurrected: a hard floor on what a unit-linked illustration may promise at a 4% gross return, and a three-year window to revive a lapsed policy from the date of the first unpaid premium.
This deep dive explains both rules in plain terms, works through the arithmetic on a sample Unit-Linked Insurance Plan (ULIP), and flags the policy-wording traps that still cost buyers money even after the 2024 consolidation. Every figure below is drawn from the circular itself or from the Income Tax Act provisions that govern how these proceeds are taxed.
The Rule / Product: what IRDAI/ACTL/MSTCIR/MISC/89/6/2024 actually mandates
The Master Circular on Life Insurance Products was issued under the IRDAI (Insurance Products) Regulations, 2024, and it applies to every life insurer registered in India. Its single biggest consumer-facing instruction is that every life insurer must give each prospect a customised benefit illustration signed by both the agent and the policyholder before a proposal is accepted, so the buyer sees their own numbers rather than a generic brochure example.
For a ULIP, the circular fixes a floor that did not exist so plainly before: at an assumed gross investment return of 4% per annum, the illustrated unit fund value at maturity must be at least 90% of the total premiums paid, computed after all charges and deductions. The industry standard, retained by the circular, is to show two scenarios side by side, a lower gross return of 4% and a higher gross return of 8% per annum, so the buyer can see the spread between a pessimistic and an optimistic outcome. The 90% floor bites only on the 4% column, which is precisely the column a nervous buyer should read first.
The second headline provision governs policies that stop paying. When a premium goes unpaid, the circular requires the insurer to communicate the policy's status within three months of the first unpaid premium, and it grants a three-year revival period counted from the date of that first unpaid premium. During the revival window the policyholder can restore the original cover by paying the arrears (and, for non-linked plans, any interest the insurer charges), rather than losing the contract outright. You can see how the underlying sum assured and maturity benefit behave through this cycle in our glossary.
Why It Matters: transparency you can hold the insurer to
Before June 2024, ULIP illustrations were the single most common source of mis-selling complaints in Indian life insurance, because the eye-catching number quoted at the point of sale was usually the 8% gross projection, not the conservative one. By forcing a 90%-of-premiums floor onto the 4% column, IRDAI/ACTL/MSTCIR/MISC/89/6/2024 gives buyers a concrete, signed benchmark: if the 4% illustration shows you getting back less than 90 paise for every rupee of premium, the product's charge structure is eating your money and you should walk. That single 90% test replaces a page of jargon.
The three-year revival window matters because lapse is common and expensive. A policy that lapses in year two of a 15-year plan can forfeit most of what has been paid if it is never revived, and the protection cover vanishes exactly when a family may need it. The circular's requirement that the insurer flag the status within three months of the first unpaid premium removes the old excuse that "nobody told me the policy had stopped". If you are weighing whether a stalled savings plan is worth reviving, our endowment vs mutual fund calculator lets you compare the revived policy's projected return against a plain investment route before you pay the arrears.
Because the illustration must be signed by both agent and policyholder before the June 2024 circular allows the proposal to proceed, it also becomes evidence. A buyer who is later shown a 4% column below the 90% floor, or who was quoted only the 8% figure, has a signed document to point to when complaining to the insurer or the ombudsman, which shifts the burden of proof away from the customer for the first time. That evidentiary value is why keeping the physical or digital copy of the illustration for the full policy term matters as much as the numbers on it.
Transparency also feeds tax planning. Whether a ULIP's maturity proceeds stay tax-free depends on the annual premium relative to the 2021 threshold discussed below, and a customised illustration now shows the exact premium the taxman will look at. Reading the illustration and the tax rule together, using a tool such as our ULIP versus mutual fund calculator, is the only reliable way to know your real post-tax outcome rather than the gross one on the brochure.
Worked Numbers: reading a compliant ULIP illustration
Take a 40-year-old buying a ULIP with an annual premium of Rs 1,00,000, a policy term of 10 years and a premium-paying term of 10 years. Total premiums paid over the life of the plan come to Rs 10,00,000. Under IRDAI/ACTL/MSTCIR/MISC/89/6/2024, the illustration must show the maturity unit fund value at both 4% and 8% gross returns, and the 4% figure must land at or above 90% of Rs 10,00,000, that is Rs 9,00,000.
The table below shows a compliant illustration alongside a hypothetical non-compliant one, so the 90% floor is easy to spot.
| Scenario | Total premiums paid | Illustrated maturity value at 4% gross | Value as % of premiums | Compliant with 2024 circular? |
|---|---|---|---|---|
| Compliant ULIP | Rs 10,00,000 | Rs 9,15,000 | 91.5% | Yes (above 90% floor) |
| Borderline ULIP | Rs 10,00,000 | Rs 9,00,000 | 90.0% | Yes (exactly at floor) |
| Non-compliant ULIP | Rs 10,00,000 | Rs 8,40,000 | 84.0% | No (below 90% floor) |
The gap between the 4% column and the 8% column is the "reduction in yield" that charges impose, and the circular requires it to be disclosed. On the Rs 1,00,000-a-year policy above, a reduction in yield of roughly 2% per annum over the 10-year term is the difference between the gross 8% path and the net return the policyholder actually keeps, which is why a plan that only clears the 90% floor at 4% by a whisker deserves a second look before signing. The next table illustrates why the two-scenario format matters: the same policy can look very different depending on which gross return the seller emphasises.
| Assumed gross return | Illustrated maturity value | Effective net return to policyholder | What the buyer should note |
|---|---|---|---|
| 4% per annum | Rs 9,15,000 | Around -1% to 0% net | Charges consume most of the low-return upside |
| 8% per annum | Rs 13,60,000 | Around 6% net | Roughly 2% p.a. lost to charges versus gross |
Now the revival arithmetic. Suppose a different policyholder holds a non-linked endowment plan with an annual premium of Rs 50,000 and misses the premium due on 1 April 2026. The insurer must notify them of the lapsed status by 1 July 2026 (three months from the first unpaid premium). The three-year revival window then runs to 1 April 2029. To revive on, say, 1 April 2028, the policyholder pays the two years of arrears, Rs 1,00,000, plus whatever revival interest the insurer charges under its board-approved policy. Once revived, the original sum assured and bonuses are restored as though the policy never stopped, which is why reviving inside the window usually beats surrendering for a reduced surrender value.
Pitfalls: the wording traps the 2024 circular does not erase
The 4% floor is a floor, not a promise. A ULIP illustration that clears the 90%-at-4% test under IRDAI/ACTL/MSTCIR/MISC/89/6/2024 is still an illustration, not a guarantee; actual unit fund values follow the NAV of the chosen funds, which can fall. The 90% rule caps how bad the illustrated conservative case may look, not how bad markets can get.
Discontinuance of a ULIP is not the same as revival being free. For a linked policy that lapses after the grace period, the fund is moved to a discontinued-policy fund and continues to bear a fund-management charge until you either revive it within the three-year window or take the proceeds after the lock-in. The three-year revival right in the 2024 circular preserves your option to restore cover, but it does not refund charges already levied, so a policy left dormant for the full three years still bleeds value. Check the grace period and lapsed-policy definitions before assuming a missed premium is harmless.
The Section 10(10D) tax trap is separate from the circular. For ULIPs issued on or after 1 February 2021, maturity proceeds are exempt under Section 10(10D) of the Income Tax Act only if the annual premium does not exceed Rs 2,50,000 (aggregated across all such ULIPs) and does not exceed 10% of the sum assured. A buyer who tops up premiums above Rs 2.5 lakh to chase the 8% illustration can convert a tax-free maturity into a taxable capital gain, a consequence the benefit illustration itself does not spell out. The customised illustration shows the premium; the taxpayer must apply the rule.
"Customised" does not mean "advised". The signed illustration required by the circular is a disclosure document, not a suitability certificate. A rider bolted on to inflate the sum assured, or a premium set just under a tax threshold, can still be unsuitable even when every box on the illustration is ticked. If you want a like-for-like cost comparison before signing, run the numbers through our term insurance premium calculator to see what pure protection costs separately from investment.
Reduced paid-up value can quietly replace full cover. If a traditional policy is not revived within the three-year window and enough premiums have been paid, it may convert to a reduced paid-up value, where the sum assured shrinks in proportion to premiums actually paid. That is better than total forfeiture, but it is a fraction of the cover you bought, and the 2024 circular's three-year revival right is precisely the mechanism that lets you avoid that outcome.
FAQ
What is the 90% rule in the IRDAI Life Insurance Products Master Circular 2024?
Under IRDAI/ACTL/MSTCIR/MISC/89/6/2024, a ULIP benefit illustration must show that at a 4% per annum gross investment return, the maturity unit fund value is at least 90% of the total premiums paid, after all charges. It is a transparency floor on the conservative scenario, not a guaranteed return.
How long is the revival period for a lapsed life insurance policy?
The 2024 master circular grants a three-year revival period counted from the date of the first unpaid premium. Within that window you can restore the original cover by paying arrears (and any board-approved revival interest for non-linked plans), rather than losing the policy.
When must the insurer tell me my policy has lapsed?
The circular requires the insurer to communicate the policy's status within three months of the first unpaid premium. For a premium missed on 1 April 2026, that notice must reach you by 1 July 2026.
Are ULIP maturity proceeds always tax-free?
No. For ULIPs issued on or after 1 February 2021, Section 10(10D) of the Income Tax Act exempts maturity proceeds only if the aggregate annual premium does not exceed Rs 2,50,000 and stays within 10% of the sum assured. Above that, the gains are taxed as capital gains.
Does the 90% illustration floor guarantee I will not lose money?
No. The floor caps how weak the illustrated 4% scenario may appear; actual returns track the fund NAV and can be lower. The rule improves disclosure, it does not underwrite market risk.
What happens if I let the three-year revival window expire?
A linked policy pays out the discontinued-fund value after the lock-in, while a traditional policy with enough premiums paid may convert to a reduced paid-up value, a shrunken sum assured proportionate to premiums paid. Either way you lose the full original cover.
How many circulars did the 2024 master circular replace?
The Master Circular on Life Insurance Products consolidated and repealed four earlier circulars, bringing benefit illustrations, discontinuance rules and product-transparency requirements into a single reference issued in June 2024.