All new life insurance policies — linked and non-linked — will come with added benefits once Irda’s new product guidelines kick in from October 1. Under the guidelines, all new insurance products will be divided into three broad categories — traditional, variable and unit-linked plans.
Insurers will have to withdraw all existing products and come out with new ones. However, they will continue to renew old policies where the contract had already been made with the policyholders. At the time of renewal of group policy, the insurer will have to give the policyholder an option to switch to the modified version. And where the policyholder does not switch to the modified version, the insurer will have to take a specific written consent that he/she will continue with the old policy.
Under the new Insurance Regulatory and Development Authority (Irda) guidelines, all traditional products will have a higher death cover. For regular premium policies, the cover will be 10 times the annualised premium paid for those below 45 and seven times for others.
For all unit-linked insurance products, life insurance companies will have to inform policyholders about the reduction in yield of their products on a monthly basis. Also, under the new norms, all variable insurance plans will guarantee a certain minimum rate of return at the beginning of the policy.
All variable insurance products will be treated at par with Ulips and these products will also follow the same commission package currently applicable for Ulips. The new norms have reduced the commission on short-term policies and linked the quantity of commissions to the premium paying period for all products.
For Ulips, the lock-in period will continue to be five consecutive years from the date of commencement of the policy. Also, during this period, the proceeds of discontinued policies cannot be paid to the insured, except in the case of death or any other contingency covered under the policy.
All individual non-linked life insurance and pension products will have a minimum surrender value based on the premium paying term. For products with a premium paying term of 10 years or more, if all the premiums have been paid for at least three consecutive years, the policy shall acquire a guaranteed surrendered value.
Similarly, for products with a premium term of less than 10 years, if all premiums have been paid for at least two consecutive years, the policy shall acquire a guaranteed