All Life Insurers permitted to transact new business shall mandatorily offer the standard product with effect from 1st January 2021.
The regulator felt it necessary to introduce a standard, individual term life insurance product, with simple features and standard terms and conditions.
Good news for those looking to buy a term insurance plan. Buying a term plan will soon become simpler as the insurance regulator, IRDAI, has released the guidelines on Standard Individual Term Life Insurance Product to be called ‘Saral Jeevan Bima’. All life insurers are directed to offer the product mandatorily. The Insurance Regulatory and Development Authority of India (IRDAI) felt it necessary to introduce a standard, individual term life insurance product, with simple features and standard terms and conditions. Such a standard product will make it easier for the customers to make an informed choice, enhance the trust between the insurers and the insured, and reduce mis-selling as well as potential disputes at the time of a claim settlement.
“The introduction of the Saral Jeevan Bima plan will be a revolutionary move in the life insurance sector as the plan will help in making the buying process much simpler and will develop strong faith and trust in customers towards the life insurance ecosystem,” says Santosh Agarwal, CBO-Life Insurance, Policybazaar.com
There are many term products in the market with varying terms and conditions. Customers who cannot devote adequate time and energy to make informed choices find it difficult to select the right product. Also, products may not be available for the intended sum assured. To take care of this situation and to make available a product by all Life Insurers that will broadly meet the needs of an average customer.
The IRDAI observed that during the last few years, there has been an increased customer preference for pure term life insurance products. In line with this growing demand, Life Insurers have been introducing innovative protection products, with different features, options, riders, etc.
“Just like the standard health insurance product ‘Arogya Sanjeevani’, the individual term life insurance product will also be the same across all insurers. The product across insurers will have the same features, benefits, inclusions, and exclusions. Though the prices, service level, claim settlement rate may differ,” says Agarwal.
The minimum sum assured is kept at Rs 5 lakh while the maximum cover can be for Rs 25 lakh. Anyone between 18 and 65 years of age can buy the plan.
“For the first-time buyers of life insurance, the plan will be a boon since the product is the same, regardless of the insurance company offering it. An important reason for introducing a standard life insurance plan is that the current life insurance products available in the market are different and quite complex, and it is difficult for the common man to understand the various inclusions and exclusions of the plans,” adds Agarwal.
Standard Term Life Insurance Product – Guidelines
1. The standard individual term life insurance product shall be called, “Saral Jeevan Bima”; the Insurer’s name shall be prefixed to the product name.
2. “Saral Jeevan Bima” is a non-linked non-participating individual pure risk premium life insurance plan, which provides for payment of Sum Assured in lump sum to the nominee in case of the Life Assured’s unfortunate death during the policy term.
3. Apart from the benefits and riders stated in the Annexure, no other riders / benefits / options / variants shall be offered. There shall be no exclusions under the product other than the suicide exclusion.
4. The product shall be offered to individuals without restrictions on gender, place of residence,
5. Death Benefit: For Regular & Limited Premium Payment policies: Highest of: – 10 times of annualized premium; – 105% of all the premiums paid as on the date of death; – Absolute amount assured to be paid on death.
For Single premium policies: Higher of: – 125% of single premium; – absolute amount assured to be paid on death.
Being a pure term insurance plan, there will be no maturity benefit under the policy.
“It is a great step by the IRDAI. At this moment the biggest issue with the term plan is that for most companies eligibility of Rs 3 lakh plus or Rs 5 lakh plus income is needed. With this, 98% of the Indian population are not eligible for a term insurance plan. If companies come up with small sum assured plan for lower income segment, it will going to help a lot with penetration of term insurance plans. Also standard term plan provides help in ease of decision making and boost the confidence of consumers while investing in the insurance plan,” says Naval Goel- CEO & Founder of PolicyX.com
All Life Insurers permitted to transact new business shall mandatorily offer the standard product with effect from 1st January, 2021. The product may be filed by the Insurers latest by 1st December, 2020. However, Insurers may file the product earlier and offer the same on approval even before 1st January, 2021.