IRDAI has now made the facility of policy loan mandatory in all life insurance savings products. Apart from this, it has announced to provide better surrender value on surrender of the policy.
IRDAI, the body that makes rules related to life insurance in the country and oversees the functioning of companies, has given a big relief to crores of policy holders. Insurance regulatory body IRDAI has now made the facility of policy loan mandatory in all life insurance savings products, which will help policyholders to meet their cash needs. Along with this, life insurance policyholders will get better surrender value on surrendering the policy after a period of one year. A ‘master’ circular regarding all the rules related to life insurance policy was issued on Wednesday. IRDAI said that the ‘free-look’ period is now 30 days. Earlier this period was 15 days. In the ‘free-look’ period, time is provided to review the terms and conditions of the policy.
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The new ‘master’ circular comes after a similar exercise undertaken by the regulator for general insurance policies. IRDA said, “This is an important step in the series of reforms taken by the insurance regulator keeping in mind the interests of policyholders. A conducive environment is now available to promote innovation, enhance customer experience and satisfaction.”
Partial withdrawal facility
According to the ‘Master’ circular, partial withdrawal facility has been permitted under pension products. This will help policyholders to meet their specific financial needs for important life events such as higher education or marriage of children; purchase/construction of residential house/flat; medical expenses and treatment of critical illness.
Better surrender value
In the new rules, insurance companies will have to ensure that the special surrender value is at least equal to the sum of the insurance amount paid, future benefits paid and accrued and vested benefits. IRDA said that in case of closure of the policy… a reasonable and valuable amount should be ensured for both the policyholders who close it and the policyholders who continue it. The circular said, “If the insurer does not appeal against the decision of the Insurance Ombudsman and does not implement it within 30 days, then the complainant will have to pay a penalty of Rs 5,000 per day.
Insurers were asked to put in place mechanisms to improve consistency, curb mis-selling and protect policyholders from financial losses and enhance long-term benefits for them.
