In major boost for customers, norms made friendlier for life insurance surrender and annuity mechanisms

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Insurance Regulatory and Development Authority of India (IRDAI) has come up with much-needed and customer-friendly modifications for insurance pension based offerings in the market. The assured death benefit that is payable upon vesting and death will be clearly defined now in case of individual pension plans. IRDA has also changed the regulations in case of annuity and surrender for non-linked and linked life insurance plans. Revisions have also been made to the revival period, minimum death benefit and regulations for pension plans.

  • The minimum sum assured upon death will be at least 7 times of the annualized premium for regular non-linked life insurance or conventional policies.
  • This will be 1.25 times of the premium in case of single-premium policies.
  • For participating products, along with the sum assured upon the policyholder’s death, the added benefits and bonus as mentioned in the plan and accrued till the date of demise will also be payable in the death benefits.
  • The death benefit will be equal to the sum assured agreed upon in the policy and unit fund balance in case of linked products.
  • For single premium policies, the sum assured will be 125% of the single premium.
  • This will be 7 times of the annualized premium in case of regular premium based policies.

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  • In case of death due to suicide, beneficiaries will get the fund value 12 months from the policy date commencement/date of intimating the death.
  • 5 years will be the policy tenor for non-linked plans. Insurers can provide a choice for altering the tenor for premium payments. For linked plans, the minimum tenor will be 5 years.
  • The assured benefit for insurance pension plans will have a single guarantee at least, either a full amount payable upon maturity/death or a non-zero positive return rate on the premium that has been paid. Upon vesting/surrender of such products, the full sum can be tapped by the customer for buying annuity/deferred annuity from the same insurance company at the market rate.
  • Up to 60% can be commuted by the customer while the remainder can be utilized for immediately buying annuities/deferred annuities from another insurance company or the same company.
  • In case of death of the customer in the deferment tenor, the nominee may use the full proceeds or partly use the same for buying an immediate/deferred annuity from either the same/another insurance company. He/she may withdraw the full amount as well. In case the proceeds are insufficient for buying the minimum annuity, lump-sum payments can be made accordingly.
  • The guaranteed surrender value will be there for non-linked protection based products in case the premium has been paid for two years in succession. This will be 30% of the entire premium paid minus survival benefits already paid, in case of surrender in the second year. In the case of surrender in the third year, it will be 35% of the premium paid minus survival benefits. In case of surrender in the 4thor 7th years, 50% of the premium paid will be the minimum guaranteed value. In case of surrender in the last couple of years of the policy, the customer will receive 90% of his/her premium that has been paid.
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Shailesh Kumar

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