Recently IRDA revamped so many changes when it
comes to Life Insurance. All these changes will be effective from 1st October
2013. It is very important for all Life Insurance buyers to understand these changes well before going ahead for any buying.
Non Linked Regulations-
1.
Non Linked
products like traditional life insurance policies will be classified as
“PARTICIPATING PRODUCTS OR “PAR PRODUCTS” and NON-PARTICIPATING PRODUCTS OR
“NON-PAR PRODUCTS” .
2.
PAR PRODUCTS
will be eligible for Bonus on annual basis + Interim Bonus + Final Additional
Bonus.
3.
Minimum Death
Benefit will be A) For Single Premium it is 125% for age up to 45
years, 110% for others. B) For Non Single Premium it is minimum 10 times of
the annualized premium (for age up to 45 years), for the rest
it is 7 times of annualized premium.
4.
For Non
Single Premium it is minimum 10 times of the annualized premium (for age up to
45 years), for the rest it is 7 times of annualized premium.
5.
The minimum
policy term will be 5 years and minimum premium paying term for non single
premium policies will be more than 5 years.
6.
Guaranteed
Surrender Value (for regular premium policies) will be as below. A) 30% of
premium paid less any survival benefit already paid, if surrendered within 2nd Or 3rd Year. B) 50% of
premium paid less any survival benefit already paid, if surrendered within 4th To 7th Year. C) 90% of
premium paid less any survival benefit already paid, if surrendered in the last
2 years of policy , if term of the policy is less than
7 years.
7.
Premiums will
be equal throughout the period of the policy.
8.
One can pay
their premium only 30 days before the date of premium due. This move has both
negative and positive effects. Negative effects are like if your employer ask
you submit investment proof before 31st January of FY and your Life Insurance
premium is due by 1st March then you are unable to produce it buy paying
advance. So you need to ask for the TDS done from your employer afterward.
Earlier to this, there was a provision to pay the advance premium and avail
discount on this. Agents used to woo policy holders to pay advance payment and
have a discount on this. Reason is, they will get a handsome commission
immediately.
9.
For monthly
premium payment mode only during the start of policy insurance company may
accept 3 months advance payment.
10.
Service
tax will be collected over and above the contractual premium. Now there will be
a clear idea about how much you are paying as tax and how much will go towards
premium. So this move will actually bring transparency.
11.
Selling of
same plan and same tenure by splitting plans will not be allowed henceforth. It
means from now onward your agent will not be able to sell the one product with same tenure by splitting Sum Assured (which increases his number of policy count
but cumbersome for policy holders to maintain the data.) Like Jeevan Anand with
tenure of 20 years can not be split like 5 policies of each SA Rs.5,00,000.
Instead you have to buy only one Jeevan Anand for tenure of 20 years and SA
Rs.25,00,000. But your agent can sell with different
terms.
12.
Existing
plans of insurance companies will be revamped to suit the new regulations.
Hence plans of LIC’s Jeevan Anand or Jeevan Tarang may come out with new
features.
13.
Policies sold
during the transition period (from 20th Feb 2013 to 1st Oct 2013) will have the
option either to have continued their policies with existing features or move
to new features.
14.
Your premiums
will come down drastically as from now onward new mortality table will be
referred to fix insurance premium. Especially LIC which is using the
1994-96 Ultimate Mortality Rates will move to IRDA’s Indian Assured Lives
Mortality (2006-08).
15.
The agents commission
structure was revamped.
16.
The product
literature must indicate whether the policy is protection oriented or saving orientd.
17.
Benefit
illustration like guaranteed and non guaranteed at gross investment returns of
4% and 8% respectively signed by both prospective policyholder and agent. It
must form the part of the policy document.
Linked Regulations-
1.
Death Benefit
will be either of below. A) The Sum Assured as agreed in the policy plus
the balance unit of fund. B) Higher
of Sum Assured or balance unit of a fund.
2.
But the
minimum maturity value should be equal to the value of units available on
maturity date.
3.
Minimum Death
Benefit will be as below. A) For single premium 125% of premium paid (if age at
entry is under 45 years) or 110% of premium paid (if age at entry is
above 45 years). B) For regular premiums 10 times of annualized premiums or
0.5 * Term of the Policy * annual premium whichever is higher (if age at entry
is under 45 years). Else 7 times of annualized premiums or
0.5 * Term of the policy * annual premium whichever is higher (if age at entry is above 45 years).
4.
Single
premium health insurance products will not be available from now onward.
5.
In case of
death within 12 months of the start of the policy or from the date of revival
of the policy then nominee will be entitled for fund value available on the
date of death.
6.
For policies
issued for minors the date of commencement of policy and risk
commencement will be same.
7.
At any point
of time death benefit will not be less than 105% of total premiums paid
including top up but excluding service tax.
8.
Minimum policy term will be 5
years and premium payment will be 5 years.
9.
Grace period
will be 15 days monthly premium paying and
30 days for in all other cases.
10.
Lock in
period will be 5 years.
11.
If policies
discontinued within 5 years then they can revive the policies within two years
or complete withdrawal without any risk.
12.
Partial
withdrawal will be available after 5 years only. But for child policies one can
not withdraw until minor insured attained the age of 18 years.
13.
Benefit
illustration like guaranteed and non guaranteed at gross investment returns of
4% and 8% respectively signed by both prospective policyholder and agent. It
must form the part of the policy document.
14.
Loan will not
be available under linked products.
15.
Heighest NAV Guaranteed Plans are
not allowed to operate.
16.
Closed ended
funds are not allowed to operate.
17.
One can pay
their premium only 30 days before the date of premium due and 3 months for monthly
premium payment schedule.
18.
Splitting of
policies will not be allowed in the case of linked policies.
19.
Same day NAV
will be applicable if the premium received or redemption request received
within 3 P.M. Else next day NAV will be applicable.
20.
Yearly statement
will be sent showing the charges and the current fund values.
These are the major points which one must know. The
list is big to go by, but I mentioned the major changes one most know.
