New Delhi: The IRDAI has changed the rules for life insurance, effective October 1, 2024. Under the new rule, insurance policyholders will receive greater surrender value when they end their policy prematurely. The consumer-focused steps are likely to benefit those who seek to quit their policy owing to the unsustainability of such a commitment.
The rule change was notified by the insurance regulator in March 2024 in a master circular. It applies to existing policies effective October 1, 2024. New insurance policies started in March 2024 were already in compliance with the rule.
What is surrender value? How to receive higher surrender value?
Surrender value is the sum that an insurer must pay to the policyholder for the premature termination of a policy. According to IRDAI rules, insurers will now be required to pay higher surrender value to those who end their policy prematurely. This is a step in the favour of consumers and aimed at ensuring flexibility of resource allocation.
Until now, policyholders lost almost their entire corpus if they sought to end their policy before maturity. This meant that policyholders were stuck with an instrument which they may have been misled into buying or which they could not contribute to anymore.
Policyholders are likely to receive up to 50 per cent of total premiums paid when the policy is surrendered after the 4th year but before the 7th year, the ET reported, citing Abhishek Kumar, founder of SahajMoney.com. Policyholders may be notified about the changes by their respective insurer or may visit the insurer’s website for details about how the surrender value is calculated.
Other changes from October 1
The IRDAI has also made it mandatory for insurers to issue a Customer Information Sheet (CIS) which contains every detail related to the policy, from premiums to benefits apart from terms and conditions. This document must be simply worded to ensure ease of comprehension for the insured.
The insurance watchdog has also introduced provisions for a fine on insurers if they fail to implement an ombudsman order within 30 days of the order date, Moneycontrol reported. Insurers will now have to pay policyholders Rs 5,000 per day for any such delays.
Life insurance rules have changed effective October 1, 2024. This will enable insurance policyholders to receive higher surrender value. here’s what it means. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
