After a hiatus of some nine long years, the IRDAI has proposed some changes for its non-linked category of products and ULIPs. Non-linked insurance products are the traditional life insurance plans including endowment and money back plans. Here the product shares no relation to the stock market and hence provides low-risk returns and has a fixed maturity sum plus bonus announced from time to time if the insurer earns profits during its operations for its stakeholders.
As per a leading business dailies report, the changes include:
Revival period increased to 5 years for both ULIP and non-linked insurance plans: The best change has been brought keeping insured's interest in mind wherein for traditional plans the deadline to revive a policy has been increased from currently 2 years to 5 years time. Also, for the ULIP products, revival can now be made within 5 years from the last paid policy premium in order to reinstate the same.
Against surrender of the policy, a sum has been fixed: If the policy is being discontinued after a period of 2 years from its commencement then a fixed sum of up to 30% will be paid while if the surrender is effected between 4th to 7th year, then the policyholder or the nominee whatever be the case shall be entitled to receive 50%. This is true for non-lined insurance products.
Minimum death benefit value reduced: This has seen a overhaul with reduction to 7 times the annual premium instead of the current 10 times. But for availing deduction under Section 80C, annual premium of life insurance policy is required to be 10 times of the single premium, said the report.
Insurance pension product to have a treatment similar to NPS: New rules allow for partial withdrawal of 25% from pension products, and this scenario is available in case of serious illness, child marriage and for study purpose.
ULIPS will be made available with riders: In the current situation, insurers for riders availed in a ULIP policy resorted to cutting down on the insured's held units. But now the same can be availed by paying a higher premium such as accidental or critical illness rider.