The revised regulations provide policyholders with better propositions in terms of enhanced surrender value for non-linked products, increased revival period also, enhanced flexibility.
In a bid to improve the product proposition, the Insurance Regulatory and Development Authority of India (Irdai) has released product guidelines for both traditional insurance plans and ULIPs. It has modified the rules for pension products, traditional plans and Unit Linked Insurance Plans by easing the surrender and annuity norms.
The new guidelines mentions, for all the non-linked individual life insurance products, the minimum death benefit, ie. the minimum sum assured on death during the entire term of the policy will not be less than 7 times the annualized premium, for limited or regular premium products, and 1.25 times the single premium for single premium products. Other than single premium products, the minimum death benefit will be at least 105 per cent of the total premiums received up to the date of death.
Aalok Bhan, Director, and Chief Marketing Officer, Max Life Insurance says, “The revised regulations provide policyholders with better propositions in terms of enhanced surrender value for non-linked products, increased revival period also, enhanced flexibility to customers in terms of reducing the premium up to 50 per cent after 5 years, allowing partial withdrawals for linked pension products.” IRDAI has increased revival period from 2 years to 3 years and 5 years for linked and non-linked business respectively. To revive a policy the insurers will have to communicate within 3 months and will have the option to revive the policy within the revival period of 3 years. The cost of rider cover, within a product, can be levied through rider charge or level rider premium. As of now, the rider premium was deducted from the Ulips in the form of NAV.
On traditional money back plans, from the earlier mentioned three years, the insurance company will now pay surrender value after payment of at least 2 consecutive years of premium.
If surrendered during the second year of the policy, the guaranteed surrender value will be 30 per cent of the total premiums paid less any survival benefits already paid, 35 per cent if surrendered during the third year of the policy, 50 per cent if surrendered between the fourth year and seventh year of the policy.
After payment of premium for the first 5 policy years, the regulator has also allowed reduction of premium and once reduced, premiums cannot be increased subsequently. On the other hand, non-linked whole life policy would offer coverage for up to 80 years.
The regulator has brought insurance at par with the National Pension System (NPS) on the pension front. Now pension holders can utilize all, or take up to 60 per cent of their holding, to purchase a deferred annuity or immediate annuity from either the same insurer at the prevailing annuity rate or from any other insurer.