After the Insurance Regulatory and Development Authority ( Irda) brought in large scale changes in the charge structure of unit-linked insurance plans, many life insurers had to restructure their products. Sensing the importance of long-term commitment from policyholders to ensure product profitability, companies started promoting the 'loyalty additions' feature in their policies.

'Loyalty additions' are meant to act as incentives to policyholders to remain invested in the policy over the long-term. Even some endowment plans and universal life plans carry this feature.

As the name suggests, 'loyalty additions' are offered in addition to the total maturity proceeds as a reward to a policyholder for sticking with the policy. They are usually offered as a percentage of the annual premiums paid after completion of a certain number of years. Or, they could come in the form of a specified percentage of your fund value at the end of a certain period.

However, depending on the amount of premium, product and the company, there could be several variations. Since they are meant to encourage long-term participation, most companies tend to bring them into effect after 10 or more years of the policy's inception. However, some plans do promise additions even earlier, although they are payable only at the completion of the policy tenure.

They could either be added to your corpus annually, at the time of maturity, or at specific intervals of say three or five years. Typically, they are paid out to the insured along with the policy's maturity proceeds.

While loyalty additions as a percentage of annual premiums could range from 2.5% to 7.5% of the premium paid, those linked to fund value could range from 0.25% to 3% of the corpus at maturity or at pre-specified intervals.

For an individual buying a Ulip or any other investment cum-insurance plan, the 'loyalty additions' could seem like bonuses that add value to the corpus without attracting any extra cost. However, one must remember that there are other factors, too, that need to be taken into account while choosing a Ulip, or any financial product for that matter, over others in the market. In other words, 'loyalty additions' should never be the sole ground for selecting a particular product.

It is best to consider, among other things, the charge structure, performance of the fund and the company's track record for settling claims before making a decision on buying a Ulip.