Hyderabad:
Changing its existing regulations, with effective from Monday, the insurance regulator IRDAI has asked the domestic life insurers to refund the premium to a policy holder or pay the surrender value of his/her policies available in case of his/her death due to suicide within 12 months from date of commencement of the life insurance policy or from the date of revival of the policy, as applicable.
Earlier, there were no regulatory provisions for any refunds to a policy holder, during the first year of policy issuance, in case he or she commits suicide and life insurers can legitimately deny any payment of claims to the beneficiaries of such a life insurance policyholder during this period. Any death claims linked to suicide were allowed only after 12 months of the policy issuance.
in its revamped life insurance regulations, that is effective from Monday,IRDAI has said that In case of non-linked policy, the nominee or beneficiary of the policyholder shall be entitled to at least 80 per cent of the total premiums paid till the date of death or the surrender value available as on the date of death whichever is higher, provided the policy is in force.
In case of an unit linked policy, the nominee or the beneficiary of the policyholder will be entitled to the fund value, as available on the date of intimation of death following the death of the policy holder due to suicide within 12 months from the date of commencement of the policy or from the date of revival of the policy, as applicable.
Further any charges other than Fund Management Charges(FMC) and guarantee charges recovered subsequent to the date of death will be added back to the fund value as available on the date of intimation of death, said IRDAI.
“Of a person commits suicide, the family is in distress. They may be hoping to get some money from insurance. It is compassionate payment and not contractual payment of claim,'' said Nilesh Sathe, former member, Life,IRDAI.
Unit Linked Policy
In case of a unit linked policy, in the revamped regulations,the maturity benefit will be at least equal to the balance in the unit fund available in the policyholders’ account on the date of maturity. The product filing documents shall clearly mention the following classification: i) Life/Pension/Health. ii) Individual/group.
A Unit Linked policy has to offer one of the following death benefits: i) The sum assured as agreed in the policy plus the balance in the unit fund; ii) The sum assured as agreed in the policy or the balance in the unit fund whichever is higher.
-For a Life Single Premium (SP) Policy, the minimum sum assured shall be at least equal to 125 percent of single premium,
-For Life Regular Premium (RP) including Limited Premium Paying (LPP) Policy, the minimum sum assured will be at least equal to 7 times the annualised premiums.
-For Health Regular Premium (RP) including Limited Premium Paying (LPP) Policy, the minimum sum assured will be at least five times the annualized premium or Rs.100,000 per annum whichever is higher
All individual Unit Linked insurance products will have either a guaranteed sum assured payable on death or a guaranteed sum assured to meet the health cover, as applicable and may have a guaranteed maturity value.
All individual Unit linked insurance products has to be at least five years. A group Unit Linked insurance products has to be for at least one year.
All unit linked discontinued policies shall be provided a revival period of three years from date of first unpaid premium. On such discontinuance, isurer shall communicate the status of the policy, within three months of the first unpaid premium, to the policyholder and provide the option to revive the policy within the revival period of three years.
In case the policyholder opts to revive but does not revive the policy during the revival period, the proceeds of the discontinued policy fund shall be paid to the policyholder at the end of the revival period or lock-in period whichever is later.
Non-linked Policies
For all the non-linked individual life insurance products, the minimum sum assured on death during the entire term of the policy shall not be less than seven times the annualised premium, for limited or regular premium products, and 1.25 times the single premium for single premium products.
Further, for other than single premium products, the minimum death benefit shall be at least 105 per cent of the total premiums received upto the date of death.
The purpose of the revised regulations is to ensure that insurers follow prudent practices in designing and pricing of life insurance products and to protect the interests of the policyholders. It would also ensure sound and responsive management practices for effective oversight and adequate due diligence with regard to designing and pricing of life insurance products, said IRDAI.