Business Desk, ETV Bharat: Taking into account the growing popularity of term insurance plans, the Insurance Regulatory and Development Authority of India (IRDAI) has directed all life insurers to come up with a standard individual term life insurance product to be called ‘Saral Jeevan Bima’ and launch it in the market by 1 January 2021.
A standard product means that it would have the same features, benefits, inclusions, exclusions and other terms and conditions irrespective of the insurance company that is selling it. Though insurers can set their own premium prices to compete in the market.
Explaining the need for such a product, IRDAI said in a circular dated 15 October: “There are many term products in the market with varying terms and conditions. Customers who cannot devote adequate time and energy to make informed choices find it difficult to select the right product.”
“It is felt necessary to introduce a standard, individual term life insurance product, with simple features and standard terms and conditions. Such a standard product will make it easier for the customers to make an informed choice, enhance the trust between the Insurers and the insured, and reduce mis-selling as well as potential disputes at the time of claim settlement,” it added.
Here’s a look at the key features of ‘Saral Jeevan Bima’ policy as directed by IRDAI:
What is the product?
Saral Jeevan Bima would be an individual pure risk premium life insurance plan, which would provide for payment of ‘Sum Assured’ in lump sum to the nominee in case of the Life Assured’s unfortunate death during the policy term.
The product would be sold with the insurer’s name prefixed to the product name. For instance: Bharti AXA Life Saral Jeevan Bima, or HDFC Life Saral Jeevan Bima etc.
What are the key features of the product?
Anyone between 18 years and 65 years of age can buy the standard term insurance plan without restrictions on gender, place of residence, travel, occupation or educational qualifications.
The minimum sum assured is kept at Rs 5 lakh while the maximum cover can be for Rs 25 lakh. Though IRDAI said that insurers have the option of offering sum assured beyond ₹ 25 lakh with all other terms and conditions remaining the same.
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Policy term can be anywhere between 5 years and 40 years. There need to be three premium payment options: regular premium, limited premium payment term for 5 years and 10 years, and single premium.
Death benefit for regular and limited premium payment policies would be the highest of 10 times of annualized premium, or 105% of all the premiums paid as on the date of death, or absolute amount assured to be paid on death.
For single premium policies, death benefit would be higher of 125% of single premium, or absolute amount assured to be paid on death.
No maturity benefit shall be payable if the insured person survives the policy term.
What would be the waiting period?
The waiting period would be 45 days from the date of commencement of risk. In case of revival of policy, the waiting period shall not be applicable.
During the waiting period, the policy would cover death only due to accident. In case of death other than due to accident during the waiting period, an amount equal to 100% of all premiums received excluding taxes, if any, shall be paid and the Sum Assured shall not be paid.
What would be the exclusion?
IRDAI said there shall be no exclusions under the standard term insurance product other than the suicide exclusion.
Can insurers provide optional riders and benefits?
Insurers can attach approved accident benefit and permanent disability benefit riders. Apart from that, no other riders/benefits/options/variants shall be offered.
When will the product launch?
IRDAI directed all life Insurers to mandatorily file the product for approval with the regulator latest by 1 December 2020 and offer it to general public with effect from 1 January 2021. However, insurers can file the product earlier as well and offer the same on approval even before 1 January 2021, it added.
