New insurance surrender value rules to come into effect on April 1

According to the latest guidelines, surrender values for life insurance policies are set to decrease if the policies are surrendered within three year.

But if the policyholder surrenders the policy between fourth and seventh year, it would lead to an increase in the surrender value, as per the guidelines released by IRDAI.

The latest rules which will come into force are as follows:

1. If the policy is surrendered during the second year, a total of 30 percent of total premiums would be paid

2. If the policy is surrendered during the third year, 35 percent of total premiums stand to get paid

3. If the policy is surrendered between the fourth and seventh year, a total of 50 percent of total premiums would be paid

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4. If the policy is surrendered during the last two years, 90 percent of total premiums would get paid

However, for non-single premium life insurance policies, a guaranteed surrender value will be given after the payment of insurance premiums for a minimum of two years in a row.

In reference to these regulations, Adhil Shetty, CEO, Bankbazaar.com, says that these steps will act as a booster for the insurance sector.

“These newly-instituted regulations are designed to foster good governance pertaining to pricing mechanisms and to ensure the provision of guaranteed surrender value, coupled with comprehensive disclosures to policyholders. These steps are likely to act as a booster for the sector and make it a win-win situation for customers and insurance issuers,” he said.  

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Published: 27 Mar 2024, 06:26 PM IST