In another attempt to make insurance affordable and available for all, the Insurance Regulatory and Development Authority of India (IRDAI) has issued a circular to all life insurers directing them to come up with a standard individual term life insurance product which will be named ‘Saral Jeevan Bima.’
IRDAI has asked all the life insurers to file the standard individual term plan with the regulator latest by December 31 2020. However, insurers may file the product earlier and offer the same on approval even before January 1, 2021.
There has been an increased customer preference towards pure term life insurance products. 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.
"An important reason for introducing a standard life insurance plan Is that the current life insurance products available in the market are different and quite complex, and it is difficult for the common man to understand the various inclusions and exclusions of the plans," said Santosh Agarwal, CBO-Life Insurance, Policybazaar.com.
The product across insurers will have the same features, benefits,inclusions, and exclusions. Even though the prices, service level, claim settlement rate may differ. For the first-time buyers of life insurance, the plan will be a boon since the product is the same, regardless of the insurance company offering it.
“The circular is in line with the requirements of the industry and the country. We welcome the move of a standard product that will surely help increase the awareness of protection plans, especially during these uncertain times. A product of this construct will also help in insurance penetration within the country. The regulator has been very proactive in the COVID times, this is yet another move that’s welcomed by industry and will surely be beneficial for customers,” said Bharat Kalsi, Chief Financial Officer, Bajaj Allianz Life.
Features of standard individual term life insurance policy - Saral Jeevan Bima :
- The standard individual term life insurance product shall be called, “Saral Jeevan Bima”, the Insurer’s name shall be prefixed to the product name.
- Saral Jeevan Bima is a non-linked non-participating individual pure risk premium life insurance plan, which provides for payment of sum assured in lump sum to the nominee in case of the life assured’s unfortunate death during the policy term.
- Apart from the benefits and riders stated in the annexure, no other riders / benefits / options / variants shall be offered. There shall be no exclusions under the product other than the suicide exclusion.
- The product shall be offered to individuals without restrictions on gender, place of residence, travel, occupation or educational qualifications.
- The Insurers shall have to file the product as per the above parameters and in compliance with the extant regulatory provisions through File and Use (F&U). The policy document and the terms and conditions of standard product shall be in the format specified in Annexure -1 to this circular. The sum assured in lump sum to the nominee in case of death of the life assured during the policy term.
- Minimum age of entry will be 18 years and maximum age will be 65 years; policy term will be 5 to 40 yerars, and maximum maturity age of 70 years.
- The standard term life insurance will mandatorily offer a sum assured between Rs 5 lakh and Rs 25 lakh. IRDAI however allows life insurance companies to offer a higher sum assured as well, without changing any conditions.
- Saral Jeevan Bima policy will provide three premium payment options -- regular premium, limited premium payment term for 5 years and 10 years and single premium
- Individuals will be allowed to choose from regular premium payment throughout the policy term, single premium payment in lumpsum or limited premium payment (5, 10 years) options.
-Death benefit under Saral Jeevan Bima
- For regular and limited premium payment policies, the death benefit will be, highest of - 10 times of annualised premium or, 1 to 5per cent of all premiums paid as on the date of death, or an absolute amount assured to be paid on death.
- For single premium policies, the death benefit will be higher of - 125 per cent of single premium, or absolute amount assured to be paid on death.
- Since it is a pure term life insurance plan, there is no maturity benefit.
- There will be a waiting period of 45 days from the commencement of the policy. During these 45 days, the policy will only cover death due to an accident.
- Offer optional accident benefit and permanent disability rider.
"The introduction of the Saral Jeevan Bima plan will be a revolutionary move in the life insurance sector as the plan will help in making the buying process much simpler and will develop strong faith and trust in customers towards the life insurance ecosystem, " added Agarwal.