The IRDA has introduced a new category for the payment of minimum death benefit, under non-linked product regulations. In a circular issued today, the regulator said for non-single premium products with terms of five to 10 years, there would be a minimum death benefit, different from other plans.
For non-participating products, it would either be five times the annualised premium or 105 per cent of all premiums paid on the date of death or the least guaranteed sum assured on maturity or any absolute amount assured to be paid on death, whichever was the highest. For participating products, it would either be five times the annualised premium or any absolute amount assured to be paid on death or the least guaranteed sum assured on maturity, whichever was the highest.
Earlier, Irda had proposed two categories for death benefits—single products and non-single products. Now, apart from single products, there are two other categories—non-single products with a term of five to 10 years and those with terms of 10 years or more.
For non-single products with a term of 10 years or more, the minimum death benefit would either be ten times the annualised premium or 105 per cent of all premiums paid on the date of death or the least guaranteed sum assured on maturity or any absolute amount assured to be paid on death (for non-par products for those below 45 years), whichever is the highest.
For those aged 45 years or more, it would be seven times the annualised premium or 105 per cent of all premiums paid on the date of death or the least guaranteed sum assured on maturity or any absolute amount assured to be paid on death, whichever is the highest.
Through its circular, IRDA has mandated the least death benefit for all individual pension products should not be less than 105 per cent of all premiums paid on the date of death. While the minimum policy paying term for most products has been fixed at five years, that for single premium group term insurance and single premium group credit insurance has been fixed at two years.
Irda has also increased the ceiling for the highest commission permissible under single premium group term insurance and single premium group credit insurance from Rs 50,000 a scheme to Rs 2,00,000 a scheme. Single premium products are those for which premium is paid as a lump sum; for non-single premium products, premiums are paid at regular intervals. While sales of retail single premium products have fallen sharply, group single premium products continue to see a rise in sales.
In the case of linked product regulations, IRDA clarified when in the event of a death due to suicide within 12 months from the date of inception or revival of the policy, any charges recovered after the date of death would be paid back to the nominee, along with the death benefit. The current least guaranteed interest rate for discontinued fund/discontinued policy account is four per cent a year. IRDA had said this was subject to change.
The regulator has said for products approved under the February 2013 traditional product regulations, a certificate of compliance would have to be submitted to IRDA , provided there was no change in benefits, premiums or charges levied. It is implied if there are changes in benefits, premiums or charges, such products may have to be re-filed. These clarifications have been implemented with immediate effect.
