There is good news for such life insurance policyholders, who after taking the policy have to surrender the policy in its initial year due to some reason, due to which they do not get anything in the name of surrender value. Insurance regulator IRDAI has removed this concern of the policyholders. The Insurance Regulatory and Development Authority of India (IRDAI) has instructed the insurance companies to start giving surrender value to the policyholders from the first year itself.
What is a surrender value?
When you take a policy, suppose the maturity is 10 years, but you surrender that policy before its maturity, then the amount you get is called surrender value this amount will be less than the full sum assured received on maturity.
IRDAI's new circular on surrender value
In a master circular issued on Wednesday, IRDAI has called it Special Surrender Value (SSV). The regulator has said that if an insured person pays the premium of the policy for one year, he will be entitled to a special surrender value on surrendering the policy.
Earlier, if an insured person surrendered the policy in one year, he did not get the surrender value. Because according to the rules of IRDAI, he gets 30% of the total premium paid only on surrendering the policy after 2 years. 35% surrender value is received on surrendering the policy after 3 years, 50% in 4 to 7 years, and 90% surrender value is received on surrendering the policy 2 years before the maturity of the policy.
How much surrender value will be received?
The new master circular states how much SSV will be received on surrendering the policy in one year. SSV should be at least equal to the existing paid-up sum assured. Now understand the paid-up sum assured. Suppose you have taken a policy of Rs 10 lakh. Which is to mature in 10 years. But if you can run it for only 2 years, then you will be entitled to only Rs 2 lakh sum assured.
According to the IRDAI circular, on surrender of the policy, the policyholder will have to pay the paid-up sum assured as well as paid-up future benefits such as income benefits, etc., if included in that policy. This surrender value will be given to the policyholder only if he has paid the premium for a full year.
How will the calculation be done?
According to the IRDAI circular - for policies with a limited premium payment period of less than 5 years and single premium policies, Special Surrender Value (SSV) will become payable immediately after the first year's premium payment.
How much interest will be received on surrender value, IRDAI has said that its calculation will have to be done on a 10-year government bond yield, and insurance companies will get a maximum cushioning of 50bps on it, that is, they can add 50 bps on it. SSV will have to be reviewed every year based on the 10-year government bond yield.
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