
The Insurance Regulatory and Development Authority of India (IRDAI) is considering increasing the final surrender value for insurance policies starting from March 2024, as reported by CNBC TV18, citing unidentified sources. However, the proposed increase in surrender value has reportedly faced resistance from insurers.
What is Surrender Value in Insurance?
The surrender value in insurance refers to the amount of money that the insurance company returns to policyholders when they terminate their policies before the maturity date. To calculate the surrender value, the insurance company deducts surrender charges from the premiums paid by the policyholders.
Variation in Surrender Value
The surrender value can vary depending on the insurer and the policy. Different insurers may have different surrender value calculations and terms.
New Regulations by IRDAI
On March 27, the IRDAI released a set of new regulations regarding the surrender value of insurance policies. These regulations, effective from April 1, state that the surrender value for life insurance policies will increase if the policyholders surrender their policies within 4-7 years.
Previous Announcement by IRDAI
In December 2023, the IRDAI published a draft paper stating that there would be no surrender charges imposed beyond a certain threshold. This effectively means that policyholders would receive their full principal amount back as the surrender value.