Life insurance is now not only a means of protection but also an important investment. But sometimes due to financial constraints it becomes difficult to continue the policy and people have to stop it midway. Now in such situations the loss will be less because the rules have changed.
Big change in the rules of surrender value
IRDAI has made important reforms in the rules related to policy surrender value, which are applicable from October 1, 2024. Now more amount than before will be returned to the policyholders under Special Surrender Value (SSV).
What is the difference between before and now
Earlier in the initial years, there was little or no refund available on closure of the policy. But under the new rules
- Partial refund possible even after 1 year
- About 30% after 2 years
- 35% after 3 years
- Up to 50% in 4 to 7 years
- Up to 90% return before maturity
For example, in the first 4 years, on surrender, you would get around Rs 2.4 lakh on an investment of Rs 4 lakh, now it can increase to around Rs 3.1 lakh.
What is surrender value?
When the policy is closed before maturity, the amount returned by the insurance company is called surrender value. It depends on how long you have paid the premium.
minimum payment rule
Now companies will have to return at least an amount equal to the Paid-up Sum Assured. That means, if you take a policy of Rs 10 lakh and pay the premium for 2 years, you can get around Rs 2 lakh.
How will SSV be decided?
SSV will be calculated every year and will be linked to the government bond yield. Insurance companies can add up to a maximum of 0.50% extra.
emphasis on transparency
Under the new rules, insurance companies will have to clearly tell the customer at the time of purchasing the policy how much money he will get if he leaves the policy midway. Policyholders have got a big benefit from the new rules. Now, even if they close the policy under compulsion, their money will not sink like before, but will get it back with better returns.