IRDA has issued a master circular in which policy companies have been ordered to pay Special Surrender Value (SSV) after the first policy year, provided the premium for a full year has been received.
Insurance Regulatory and Development Authority of India (IRDAI) has given a big relief to such life insurance policy holders who want to surrender the policy in the first year of insurance due to some reason. IRDAI has asked all life insurance companies to provide the facility of surrender value in the first year of life insurance. Earlier, policyholders did not get any value on cancellation of insurance in the initial years of the policy.
Special surrender value will be available on policy surrender after 1 year
The insurance regulator has issued a master circular, in which policy companies have been ordered to pay Special Surrender Value (SSV) after the first policy year. Provided the premium of a full year has been received. Apart from this, the Insurance Regulatory and Development Authority of India (IRDAI) said in its master circular that for policies with limited premium payment term of less than five years and single premium policies, SSV should be payable immediately after the receipt of the first full-year premium or single premium.
Earlier this was the rule
Let us tell you that earlier if a policy holder wanted to surrender within a year of opening the policy, then he did not get the surrender value. This was because earlier according to the rule of IRDAI, he used to get 30 percent of the total premium only if the insurance was surrendered after 2 years. Whereas after paying premium for 3 years, 35 percent of the total premium value was given on surrendering the policy.
Apart from this, 50 percent surrender value was given on surrendering a policy between 4 to 7 years. At the same time, on cancelling the policy 2 years before the completion of the policy period, the policyholders got 90 percent of the total premium value.
It will affect the margins of insurance companies
Let us tell you that under the new life insurance rules, there is a proposal to start paying benefits in advance, which will have a huge impact on the margins of life insurance companies. However, some insurers believe that it will not have much impact, because more than 85 percent of policies remain active even after the initial 1 year.
