How new traditional insurance plans are better than older plans?

Planning

oi-Roshni

By Roshni Agarwal

Published: Wednesday, January 22, 2014, 13:10 [IST]

IRDA, the institution regulating insurance sector in India, with the beginning of the new year has asked players in the industry to introduce novel plans that incorporate different stipulations set forth by it or overhaul the existing plans fully. Such new mandates are primarily aimed to serve the interest of customers in a better way and offer assured benefits together with greater financial protection against death.

Death Benefit: As regard the main purpose for which insurance is purchased i.e. financial protection against death of the insured to family members and dependents, the new products are available with minimum sum assured and death benefit value. Further, the minimum value of death benefit or D.B is decided on the basis of age of the policyholder and policy tenure.

In case a person aged less than 45 years applies for a policy with a minimum tenure of 10 years, insurer is liable to pay a minimum of 10 times the annual premium paid by the insured as death benefit.

In case a person is aged over 45 years, the minimum death benefit, is not to go lower than seven times the annualised premium amount paid by the person maintaining the insurance plan.

In case the policy term is less than 10 years, the guaranteed Sum Assured on Death has to be not below five times the premium paid by the policyholder on an annualized basis.

In case of single-premium plans, depending on the age minimum sum assured on death has been pegged at some proportion of the premium amount. For instance, for insured aged 45 years and above, minimum Sum Assured on Death has to be 110% of the premium while for younger insured population it has to be a minimum of 125% of premium amount.

Surrender value: In case on account of some liquidity concerns, you wish to liquidate your investments in insurance plans, the new plans shall now offer some minimum guaranteed surrender value or SV which is higher in comparison to previous life insurance plans. In case the premium paying tenure is less than 10 years, you shall be entitled to the SV after paying premium for a minimum of 2 years. However, for polices with higher premium paying term over 10 years, surrender on the policy is allowed after paying a premium for 3 years.

And the surrender value in this case shall amount to a minimum of 30% all premiums paid. However, in case the surrender for the policy is demanded just 2 years before the premium maturity term of the policy, policyholder can realize upto 90% of the total premium paid.

Other area where improvement in the new insurance plan is effected is with respect to commission and depending on the term of the policy.

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