In the recent past, many important changes have been made in insurance related regulations. Now under the new change insurance companies have been mandated to give loans on policies of all life insurance products. Through it the liquidity needs of the policyholder can be met. The Insurance Regulatory and Development Authority of India (IRDAI) has issued a key circular in this regard.
What did Irda say?
In its main circular to life insurance companies, Irdai said all non-linked savings products offering surrender value will have policy loan facility based on the eligible surrender value. Let us tell you that surrender value is the amount that a policyholder can withdraw from his life insurance policy at any time. The policyholder will be eligible for the loan based on the eligible surrender value. However, the regulator said loans under Unit Linked Insurance Products (ULIPs) will not be allowed.
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Regarding consumer protection, Irdai said insurance companies are required to comply with the Insurance Ombudsman’s decision within 30 days. If the insurance company does not respect the Ombudsman’s decision, it will have to pay a fine of Rs 5,000 per day to the complainant. The regulator has also given partial withdrawal option to policyholders under pension products.
Withdrawal option
Policyholders can use these withdrawals to meet financial needs for important life events like higher education or marriage of children. This rule also applies to purchase or construction of a house or flat, medical expenses and treatment of serious illness. Only three withdrawals will be allowed during the tenure. The partial withdrawal should not exceed 25 percent of the total premium paid on the date.