The Insurance Regulatory and Development Authority of India (IRDAI) has come out with final regulations in relation to surrender value on March 24.
These regulations, which will be effective April 1, 2024, state that the surrender value is expected to remain the same or even lower if policies are surrendered up to a period of within three years. For policies that have been surrendered from the fourth to the seventh year, the surrender value may see a minor increase.
A surrender value in insurance refers to the amount paid by the insurance company to the policyholder upon terminating the policy before its maturity date. If the policyholder surrenders during the policy tenure, the earnings and savings portion will be paid to him or her.
This comes days after Moneycontrol published a report stating the IRDAI was likely to water down the higher surrender value proposal.
This in effect means that if an individual holds on to the policy for a longer period of time, the surrender value will be higher and the converse is also true.
Earlier on, life insurers had raised concerns about asset-liability management issues that could crop up while implementing the IRDAI’s December 2023 proposal. The draft had mooted the introduction of threshold premiums and higher surrender values for endowment policies.
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