From allowing partial withdrawal to increasing revival period, life insurance products will witness a host of changes from next year. The new rules will be effective from February 1, 2020. To benefit customers, the Insurance Regulatory Development Authority of India (Irdai) has relaxed regulations for pension plans, Ulips and traditional life insurance plans.
Let's take a look at the changes:
1) In case of unit-linked products, the revival period has been increased to three years. For non-linked products the revival period will be five years. Earlier the revival period was two years. Revival period means the period from the date of first unpaid premium during which period the policyholder is entitled to revive the policy which was discontinued due to the nonpayment of premium.
2) From February 1, withdrawal limit in pension plans is all set to increase. The maximum withdrawal allowed at maturity will be 60% instead of the existing one-third of the corpus. However, in pension plans, withdrawal of one-third corpus is tax-free, not the entire 60%.
"With this new amendment, the regulator has made pension plans as per with the NPS products. This change will be beneficial for the customers and the insurance industry," said Sanjay Tiwari, Director, Strategy, Exide Life Insurance.
3) Irdai has also tweaked the norms for prematurely partial withdrawals. Customers will be allowed to make partial withdrawal of up to 25% once the lock-in period of five years ends. Partial withdrawal will be allowed for higher education, children's wedding or critical illness or for buying or construction of a residential property.
"Earlier 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 come down to seven times instead of the existing 10 times for those under the age of 45. 'Sum Assured' is a guaranteed amount that is payable in case of the policy holders' death.
5) The mandatory guarantee on pension Ulip segment will become optional from February 1. Earlier, Irdai made it mandatory for insurers to offer guarantee on pension Ulip plans. Now, the policyholders will have more flexible option o choose whether they want a guarantee or not.