To lend a better understanding of various insurance products to its customers, IRDAI on October 26, 2018 has made a proposal of bringing about some major changes. At the same time, it has set different benefits for its policyholders.
So here are detailed 5 newly proposed changes in life insurance policies:
1. Changes in minimum death benefit pay-out: It has been proposed that a minimum death payout to the extent of 7 times shall be offered on regular premium products and in case of single premium plans a death benefit equivalent to 1.25 times shall be provided in respect of all ages.
In the present case, the minimum death benefit in case of individual aged less than 45 years, minimum death benefit payout stands at 10 times while in the other case it is 7 times. It is to be noted that such pay-outs are eligible for deduction under section 80C.
And as per insurance experts, the move is likely to benefit policyholders as the money invested as premium will be going towards investment and not towards mortality charges. So, enhanced channelization of your invested money via policy will result in corpus building and not get reduced by way of mortality charges.
2. Non-linked policies to offer surrender value after 2 years: In the present case, guaranteed surrender value is provided after continuation of policy for 3 years. Thus with the new proposal if implemented, policy surrender time will be reduced by one year as it will then help customers to take quick decisions about their investment.
3. In case of pension plans, customers must be allowed to commutate up to 60% of the sum assured value. But in the case of market linked pension policies, policyholders are allowed to partially withdraw funds.
Currently for a pension plan, policyholder can withdraw one third of the amount as lump-sum while rest of the amount is mandatorily annuitized.
The new proposed change of up to 60% commutation will make the insurance product at par with the NPS product. In the case of market linked pension product enabling policy holder to withdraw at some of the events will make the policy more flexible.
4. Revival period extended for up to 5 years as against 2 years in relation to non-linked products: For policies, the revival period during which all the benefits payable on a policy are provided to the policyholder in case the premium was left unpaid is maximum 2 years. But the new proposal will increase the restoration time for a policy from currently 2 to 5 years.
5. Settlement option increased from the current 5 years time to 10 years in case of ULIPs: The settlement period for paying installment towards insurance premium is 5 years and this is provided for receiving maturity or death proceeds in installments as per the terms and conditions of the policy.
So, in a case when there occurs some untoward incident, you will get more time to settle the due installments.