The surrender values for life insurance coverage would witness a reduction when policies are surrendered during the first three year, as per the recently announced guideline. If the insurance is surrendered in year two, a total of 30 percent of the total premiums would be paid.
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Insurance regulator Insurance Regulatory and Development Authority (IRDAI) has announced a set of updated rules in regard to the surrender value of insurance policies. The new set of regulations will come into forced on April 1, 2024.
According to the current guidelines, surrender values for life insurance policies are slated to decline if the plans are surrendered within 3 year.
However, if the policyholder surrenders the policy between the fourth and seventh years, the surrender value would increase, according to the IRDAI guidelines.
1. If the insurance is surrendered during the 2nd year, a total of 30 percent of total premiums would be paid
2. If the coverage is relinquished during the third year, 35 percent of total premiums stand to receive reimbursed
3. If the insurance is surrendered during the fourth and seventh year, an amount of 50 percent of total premiums would be paid
4. If the coverage is surrendered during the final two years, 90 percent of total premiums would receive paid
However, for non-single premium life insurance contracts, a guaranteed surrender value will be paid following the payment of insurance payments for a minimum of two years in a row.
In relation to these laws, Adhil Shetty, CEO, Bankbazaar.com, thinks that these initiatives will work as a booster for the insurance business.
"These new laws are designed to promote good governance in pricing systems and assure the supply of guaranteed surrender value, as well as complete information to policyholders. These initiatives are likely to work as a booster for the industry and make it a win-win scenario for clients and insurance issuers," he added.
