The outbreak of COVID-19 has highlighted the importance of having life insurance policies. Catching on the trend, insurance regulator IRDA has now asked insurers to launch a standard term insurance plan -- Saral Jeevan Bima -- which will be available in the market from January 1, 2021. A standard term plan means the product features will be similar across insurers, although pricing may differ.
Currently, one has to take a minimum sum insured of Rs 25 lakh so as to buy a term plan. However, Saral Jeevan Bima will come with a minimum sum insured of Rs 5 lakh, which can go up to Rs 25 lakh. Insurers will have liberty to offer even higher coverage in the multiple of Rs 50,000, provided product features remain the same.
"At this moment the biggest issue with the term plan is eligibility criteria. Insurers require customers with an income of Rs 3 lakh to Rs 5 lakh for a term plan coverage of Rs 25-30 lakh. Due to this criterion, 98 per cent of the Indian population does not get eligible for a term insurance. If companies come up with small sum assured plans for the lower income segment, it will help in penetration of term insurance plans," says Naval Goel, CEO & Founder of PolicyX.com.
The standard term plan will be a non-linked non-participating pure risk premium life insurance plan. It means the insurer will provide lumpsum death benefit to the nominee in case the policyholder passes away during the policy period. The death benefit will be highest of the following depending on the premium payment option (regular or limited) --
i) 10 times of annualised premium;
ii) 105 per cent of all the premiums paid as on the date of death;
iii) Absolute amount assured to be paid on death.
For Single premium policies, higher of the two -- i) 125 per cent of single premium, ii) the absolute amount assured to be paid on death.
"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," IRDA says in the circular. The product shall be offered to individuals without restrictions on gender, place of residence, it adds.
The policy term could be from five to 40 years, while the minimum and maximum entry ages will be 18 to 65 years.
"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. 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," says Santosh Agarwal, Chief Business Officer, Life Insurance, Policybazaar.com.
All life Insurers permitted to transact new business will have to mandatorily offer the standard product with effect from January 1, 2021. The product may be filed by the insurers latest by December 1, 2020. However, insurers may file the product earlier and offer the same on approval even before January 1, 2021.
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