The rules for life insurance policies will change from next year. all you need to know

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From allowing partial withdrawals to increasing the dunning period, life insurance products will see a host of changes starting next year. The new rules will come into force on February 1, 2020. For the benefit of customers, the Insurance Regulatory Development Authority of India (Irdai) has relaxed the regulations for pension schemes, Ulips and traditional life insurance schemes.

Let’s see the changes:

1) In the case of unit-linked products, the renewal period has been extended to three years. For unrelated products, the renewal period will be five years. Previously, the revival period was two years. Restart period means the period from the date of the first unpaid premium during which the policyholder has the right to revive the policy which has been interrupted due to non-payment of premium.

2) From February 1, the withdrawal limit in pension plans should increase. The maximum withdrawal allowed at maturity will be 60% instead of the existing third of the corpus. However, in pension plans, the withdrawal of one-third of the corpus is tax-free, not the full 60%.

“With this new amendment, the regulator has created NPS-compliant pension plans. This change will benefit customers and the insurance industry,” said Sanjay Tiwari, Chief Strategy Officer, Exide Life Insurance.

3) Irdai has also changed the standards for premature partial withdrawals. Customers will be allowed to make a partial withdrawal of up to 25% after the five-year lock-in period ends. A partial withdrawal will be allowed for higher education, child marriage or serious illness or for the purchase or construction of residential property.

“Previously, the withdrawal was not allowed by the regulator. This is a welcome move by Irdai,” Tiwari added.

4) The minimum life cover in Ulips will be reduced to seven times instead of the existing 10 times for under 45s. The “Sum Assured” is a guaranteed amount payable in the event of the death of the insured.

5) The mandatory guarantee on the Ulip pension segment will become optional from February 1st. Previously, Irdai had made it compulsory for insurers to offer a guarantee on Ulip pension plans. Now policyholders will have a more flexible option to choose whether they want coverage or not.

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