2023-12-17 04:44:02
New Rules Proposed by IRDAI for Insurance Surrender Value
Thinking of surrendering your insurance plan? Do you feel like you are not getting much benefit from your policy? The Insurance Regulatory and Development Authority of India (IRDAI) has released a proposal for new rules regarding insurance policy surrender value.
The proposed new rules are in the interest of the policyholder. IRDAI states that if a policyholder wants to surrender their plan early, the amount paid by the insurance companies has to increase significantly. Surrender value is the total payout an insurance company pays to a policyholder in case the policy is surrendered before its maturity.
In a policyholder-friendly move, the insurance regulator has proposed to amend the rule to increase the surrender value of traditional life insurance policies. This means that the amount an investor would receive if they surrender the policy without completing the entire term of the policy will be higher.
The new rules also propose to define a premium limit for each policy and prohibit surrender charges on the balance of premiums beyond such limits when they are surrendered during the policy period. This will impact insurance companies, as they will have to choose between lower sales or lower profits. If they choose lower sales, they must accommodate the higher payment by reducing the commission.
Currently, the surrender value is calculated as a percentage of the total premium paid. The surrender value factor increases over the years, with a traditional policy getting surrender value in the third year. The surrender fee may result in loss for the policyholder, but the proposed new rules aim to reduce this fee.
The impact of these proposed rules on policyholders is yet to be seen, but they may result in a loss for insurance companies. IRDAI has not set a limit value for the surrender value increase, but has given an example of increasing the surrender value by about 1.8 times the existing level in the second year and 0.8 times in 5 years.
While the new rules aim to benefit policyholders, the impact on insurance companies and the actual reduction in surrender fee is yet to be determined. The insurance industry awaits further clarification and guidance from IRDAI. Stay tuned for more updates on this development.
#IRDAI #Proposes #Rule #Surrender #Policy #Surrendering #policy #result #loss.. #IRDAIs #rules