The Insurance Regulatory and Development Authority of India (IRDAI), which oversees life insurance rules and company operations, has introduced significant benefits for millions of policyholders.
One major change is making policy loans mandatory for all life insurance savings products, which will help policyholders meet their cash needs.
Additionally, policyholders will now receive a better surrender value if they surrender their policy after one year. These updates were outlined in a ‘master’ circular issued on Wednesday.
IRDAI also extended the ‘free-look’ period from 15 days to 30 days, allowing more time for policyholders to review the terms and conditions of their policy.
Enhanced Policy Features and Protections
Partial Withdrawal Facility
The ‘master’ circular also permits partial withdrawals under pension products. This facility will assist policyholders in addressing specific financial needs for significant life events such as children’s higher education or marriage, purchasing or constructing a residential house, and covering medical expenses for critical illnesses.
Improved Surrender Value
Under the new rules, insurance companies must 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.
IRDAI emphasized that policyholders should receive a reasonable and valuable amount whether they continue or close their policy.
Moreover, if an insurer does not appeal against the Insurance Ombudsman’s decision and fails to implement it within 30 days, the complainant will receive a penalty of Rs 5,000 per day.
Insurers are also required to establish mechanisms to improve consistency, prevent mis-selling, protect policyholders from financial losses, and enhance their long-term benefits.
