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IRDAI recently announced that it will retain its surrender value norms, contrary to its previous proposal to put a threshold on surrender charges and increase surrender value so that policyholders get a higher amount after prematurely terminating the policy. The latest regulations will be applicable to both linked and non-linked life insurance products.
In the context of life insurance, surrender value is the amount paid by an insurer after a policyholder decides to prematurely terminate his/her policy.
The surrender value slabs finalized in the new regulations are as follows:
- 30% of total premiums paid if policy is surrendered during the second year
- 35% of total premiums paid if policy is surrendered during the third year
- 50% of total premiums paid if policy is surrendered between the fourth and seventh year
- 90% of total premiums paid if policy is surrendered during the last two years
These guidelines come into effect from April 1.
