UTILITY : From 1 February, the insurance regulator is going to change the rules of Insurance Regulatory and Development Authority of India (IRDA) insurance policy. New guidelines are going to apply for unit-linked insurance plans and traditional life insurance policies. IRDA has already instructed the insurance companies to change the insurance policies. The new rules will have several changes, such as increasing the time to revive a policy, increasing the amount to buy ULIPs and withdrawal of money from pension schemes.
Increase in time period for policy revival
IRDA has asked the insurance companies to extend the revival time period to get life insurance policies reactivated. Now you will get 3 years from the date of unpaid premium in ULIP plan instead of 2. At the same time, now there will be 5 years to get the policy revived for non-linked insurance products.
Premium guaranteed to buy ULIPs
From February 1, the terms and conditions for purchasing a Unit Linked Insurance Plan (ULIP) will become the same for people of all ages. From February 1, the minimum sum insured to purchase ULIPs for policyholders under 45 years of age will be reduced from ten times the annual premium to seven times. Currently, only people over 45 years of age are eligible to purchase ULIPs with an insured amount less than 10 times the annual premium. This may give better returns with less insured amount.
The pension plan will benefit policy holders
The compulsory guarantee given on maturity benefits on the pension plan will now be optional. Currently, insurance companies have to offer a guarantee on maturity. This means that they have to invest in debt instruments to guarantee maturity income. Which reduces the potential return from the investment. If you have a long-term goal, you can invest a higher amount in equity from the insurance company and also opt for the No Guarantee option. With this new rule, the policyholder will get the option to make more profit on his investment by choosing ‘No guarantee option’ and by increasing the equity exposure in the policy from the insurance company.
Withdrawal limit from pension schemes will increase
In order to improve flexibility and liquidity, insurance companies will now have to give back 60% of the amount. The museum limit is 33%. Experts believe that this will also benefit policy holders. Higher liquidity will facilitate withdrawal of money from pension funds for larger goals or treatment.
Changes in surrender value rules
The rules regarding surrender value have also become according to the policy holder. When you decide to leave the time of pre maturity from the plan, the amount you receive is called the surrender value. In case of life insurance policy, if you think of ending your policy for any reason, then you will not have to wait for three years to get the guaranteed surrender value, but now you will be able to end the policy in two years only.
Companies have announced the closure of many insurance policies
After the new guidelines of IRDA, the insurance companies have announced to discontinue many of their insurance policies. Life Insurance Corporation (LIC), the country’s largest life insurance company, has announced the closure of 23 of its insurance policies, including individual insurance policies, group insurance plans and rider plans. Apart from this, other companies have also announced the closure of more than 50 insurance policies.
New insurance policies will be launched after 29 February 2020
IRDA has asked all insurance companies to change their products under the new guidelines. It has been said that products which cannot be changed under the new rules can be recalled. The products which the insurance companies are withdrawing can be changed within three months i.e. by 29 February 2020, and after that they can be re-launched as a new product. IRDA says that its guidelines will apply to the new insurance policy.