The Insurance Regulatory and Development Authority (IRDA) has revised the minimum death benefit and minimum surrender value norms for traditional life insurance products. Traditional life insurance products now come with a mandatory higher minimum death benefit and surrender value.
What is changed?
1- Minimum Death Benefit
For customers below 45 years, the minimum sum assured should be higher by 10 times (as against the existing five times) the annual premium or 0.5 times the annual premium multiplied by the term of the policy or 105 per cent the premium paid as on the date of the policyholder’s death.
2- Minimum Guaranteed Surrender Value
There is also a minimum guaranteed surrender value of 50 per cent of the total premiums paid, if the policy is surrendered in the second or third year while the same would be 75 per cent for the fourth year, and goes progressively upward.
What happen to Existing Policies?
Life insurers have been given time to withdraw group and individual policies before March 31 and June 30 respectively and have to file for product approvals afresh in line with the new guidelines.
Last year in June’2012, the IRDA issued a draft guidelines on the proposed above changes in life insurance products.