Policy Rule Change: Rules have changed, now you will get more money on surrendering the insurance policy..
Today, from October 1, there has been a big change in the rules of Life Insurance Policy. There will be three benefits of implementing the new guaranteed surrender value rules. Now policyholders will be able to surrender the policy easily, doing so will also get more refunds and it will also be easy to change the plan. These changes will especially affect traditional life insurance products, including bonus-based (par) and non-participating (non-par) policies.
Under the new rules, policyholders will now get guaranteed surrender value from the first year itself, even if they have paid only one annual premium. Earlier, this facility was available from the second year. However, experts say that those who hold the policy for a long time may get less return than this. Returns on non-par policies may fall by 0.3-0.5 percent, while bonus payments in par policies will also be less.
How much money will be returned after one year?
A policyholder bought a 10-year policy with an insurance sum of Rs 5 lakh. In the first year, he paid a premium of Rs 50,000. According to the old rules, if he left the policy after one year, he would not get any refund. That is, he would have lost Rs 50,000. But according to the new rules, he will get a refund even if he leaves the policy after one year. If the insurance company has received the premium for the whole year, then it will have to return Rs 31,295 to the policyholder.
More refund on surrendering the policy
According to a report in Economic Times, Abhishek Kumar, SEBI registered investment advisor and founder of Sahajmoney.com, says that according to the earlier rules, if the policy was surrendered between the fourth and seventh year, then it was mandatory to pay 50 percent of the total premium. Suppose the total premium of a policy is Rs 2 lakh. If you surrender the policy after 4 years, then according to the previous surrender value rules, you would get Rs 1.2 lakh back as surrender value. According to the new rules implemented now, Rs 1.55 lakh will be refunded on surrendering the policy.
What will be the impact on companies?
According to a Times of India report, with government bond rates falling from 7.10% to 6.8% in the last four months, insurers have so far maintained the internal rate of return (IRR) on their products. However due to the new rules, companies are considering reducing their IRR and adjusting it according to the current interest rate environment. Rushabh Gandhi, MD and CEO of India First Life said, "Many insurers have not changed the IRR of their products so far, but with the new surrender rules, insurers may make changes to their products, which may reduce the IRR."
What will be the impact on the agent's commission
After the new rules come into force, insurers may also have to change their commission structure so that they can protect profits under the new rules. Some companies may adopt a 50-25-25 commission model, where 50% of the agent's commission will be paid in the first year and the rest will be paid in the second and third years. At the same time, some companies are considering a trail-based commission model, which will allow commissions to be paid during the policy term and control financial losses due to early surrender.
