IRDA has mooted a higher surrender value and lower charges for life insurance companies.
An exposure draft released by the insurance regulator pitched for a significant increase in the surrender value specifically for non-participating insurance products. Some modifications have also been suggested in the calculation of surrender charges.
In insurance policies, ‘surrender’ indicates the voluntary conclusion of a life insurance policy opted by the policyholder prior to its maturity or before the occurrence of the insured event.
This will result in the cessation of premium payment and the policyholder’s insurance cover. However, as the policyholder would have paid some premium before surrendering the policy, a life insurance company is mandated to provide a specific surrender value to the policyholder.
“There shall be a premium threshold defined for each product, wherein, there shall not be any surrender charges imposed on the balance of the premiums beyond such threshold limits, irrespective of the timing of the surrender,’‘ the exposure draft said. There are variations in the threshold defined among the different products depending on their nature and design.
