In an effort to introduce easy products, insurance regulator IRDAI has mandated a standard term insurance plan.
After the special covers made for Standard Regular Health Insurance and Kovid-19, you will now have to buy a standard term insurance policy made mandatory by the insurance regulator from 1 January 2021.
The Insurance Regulatory and Development Authority of India (IRDAI) has introduced a standard term insurance plan. Every life insurance company will have to offload this standard term insurance plan. Insurance companies will have to start selling these policies. Their name will be simple life insurance and next it will be the name of life insurance company. These companies will have to launch this plan in the market on or before 1 January 2021.
Chief of IRDAI Subhash Khuntia has already announced the launch of such plans.
What will happen in this plan?
This policy will be offered for people between 18 and 65 years of age. The tenure of this policy will be from five years to 40 years. In this, you can take a sum assured of minimum Rs 5 lakhs. The maximum limit of sum assured will be Rs 25 lakh. However, insurance companies can also offer a higher sum assured, but it will be necessary to use the term life insurance policy.
You can choose terms that pay regular premiums. These include options like paying premium for five or 10 years or paying the premium at one go. Premiums can be paid on a monthly, half-yearly or yearly basis in regular and limited pay policies.
Death benefit will be 10 times the annualized premium, 105 per cent of all premiums paid till death and the highest of the amount fixed at the death of the policyholder.
In a single premium policy, the death benefit will be paid at 125% of the single premium and the higher of the fixed amount to be paid on death.
Insurance companies are allowed to apply two riders. These are Accident and Permanent Disability Benefit Options for an additional premium.
The cover will come with a 45-day waiting period after the policy is issued. During this period, only the accidental death will be paid. If death occurs due to any other reason, 100% of the premium excluding tax will be given to the dependent.
Will other term plans not work?
The demand for purely protection term insurance has increased over the years. In this, your heirs get lump sum after your death and in this way they provide very important financial help to your family after your passing.
Unlike traditional endowment plans, term insurance does not provide any return on your survival during the policy term. In such a situation, the premium for these term plans is very low.
However, many term plans present in the market can cause confusion. Regarding why a standard term plan was needed, IRDAI said, “Many term plans with different terms and conditions exist in the market at the moment. For those customers who do not have so much time and energy to understand and choose these plans, there is a lot of problem for them. ”
Insurance regulators believe that with the introduction of standard products, the activity of selling insurance policies incorrectly in the market will also be reduced. IRDAI has said, “This will give customers the freedom to make choices with information. This will also increase the trust between the insurance companies and the policy takers. Also, it will help reduce potential disputes during miss-selling and claim settlement. ”
However, IRDAI has mentioned the features and policy terminology and it will remain the same in all policies, but life insurance companies can fix the premium. A similar health insurance plan is in Arogya Sanjeevani, Corona Kavach and Corona Rakshak Standard Policies.
According to Bharat Kalsi, chief financial officer of Bajaj Allianz Life, “Pricing will be based on the customer segment and factories like Sum Assured and will be approved by the regulator.”
Will there be any benefit from standard term plans?
Experts believe that having the same features and policy terminology will make it easier to buy term plans.
Santosh Aggarwal, Chief Business Officer, Life Insurance, PolicyBazaar.com, says, “This plan is suitable for buyers buying life insurance for the first time. It will have the same features, benefits and other things across all insurance companies, however, the price may vary. ”
You have to wait for how the insurance companies launch the plan with premium.
Since IRDAI has left the right to fix premiums to insurance companies, it will cover things like your age, income, health history.
Like most term policies, there will be a difference in premium between smokers and non-smokers. Non-smokers will have lower premiums. A good thing is to keep certain things out and a clear definition of waiting period.
Saroj Kanta Satpati, chief operating officer of JB Boda Insurance and Reinsurance Brokers, says, “Death benefit looks more beneficial as it takes care of livelihood security policies (LPP).
Unlike health insurance policies, pure protection, regular term insurance policies are very simple products.
Policyholders pay the premium and on death the insurance company pays the sum assured to his family members.
Over the years, life insurance companies have launched new features like paying in a phased manner, paying in a lump sum and in a phased manner, and rising inflation based payouts.
This has probably made it difficult for many people to choose these term plans. However, insurance companies are also continuously issuing easy term plans in which the sum assured is paid to the family after the death of the policyholder.
In such a situation, the utility of standard term plans will be limited compared to health policies with uniform features and conditions.
However, if you are buying a policy for the first time, then this product will help you start worry-free as its features will be the same in all life insurance companies. With the same terminology and exclusions, there is no possibility of any dispute in future.
After the products come in the market, you can choose your insurance company on the basis of premium. Along with this, you can also look at things like claim settlement and track record.
If you are looking for a high-value term cover, then take a look at the record of repaying claims, especially of companies.
