If your insurance agent is forcing you to buy a life insurance plan before November 30th, hold on. There could be a good reason he is doing so. IRDA the Insurance Regulator is changing the way you buy life insurance plans. From December 1st 2019 a new set of rules will be in play in the insurance sector.
Insurance Companies would tweak insurance products to match the new changes. Some insurance plans would see an increase in premium payments. If your insurance agent is telling you to buy fast before premiums rise he is right, but not telling the entire truth. If you buy life insurance in December, it’s only going to get better. You will get a life insurance plan which meets your needs.
Let’s take a look at 7 changes for insurance plans from December. Want to know more about Term Insurance? We at IndianMoney.com will make it easy for you. Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. IndianMoney.com is not a seller of any financial products. We only provide FREE financial advice/education to ensure that you are not misguided while buying any kind of financial product.
You now enjoy higher withdrawals from pension plans. Earlier it was just one-third, but it’s now raised to 60%. Take note this does not mean pension plans are now on par with NPS when it comes to taxation. In pension plans only one-third is tax-free. It’s just the percentage of withdrawal that has gone up. The proceeds which are above the one-third withdrawal are taxable.
See Also: 10 Best Things About Term Insurance
You have a wider choice when it comes to buying annuity plans. Choose a different insurer for the annuity scheme from the open market. You can use up to 50% of the maturity corpus to buy an annuity plan from the insurer of choice who offers higher returns. You don’t need to stick to the insurer from whom you bought the pension plan. Lack of competition denied policyholders the power to enjoy higher annuity rates.
Unit Linked Pension Plans are going to see a big change after the new rules come in. Insurers currently have to give a guarantee on the vesting date. They have to invest largely in debt which restricts higher returns. If you have chosen the pension plan early, you can afford to take more risks and invest inequities. You get to choose if you want an assured benefit or not. Young people can choose equity as they can stay invested for the long-term.
Endowment Plans which have tenure over 10 years acquire surrender value if just 2 years premiums are paid. It used to be 3 years earlier. For those who don’t know, surrender value is the amount you get on a premature exit.
For older plans, surrender value was limited to 30% of the premiums paid. This goes up to 35% after December 1st 2019. Penalties for premature exit remain steep. If policies have a tenure greater than 7 years, surrender values would increase progressively and converge to at least 90% as the policy moves to maturity.
You and other policyholders have the freedom to reduce premiums after the fifty policy year. Insurance premiums are long-term products and must be serviced annually. If you don’t have the money to pay premiums, the policy lapses. You now have the option to reduce premiums by 50% while keeping the policy in force. This reduces the financial burden if you have been mis-sold a life insurance plan.
For ULIPs the minimum cover offered has come down from 10 times annual premium to 7 times annual premium. Currently, insurers have to offer minimum cover 10 times the annual premium to those who are under 45. It’s 7 times the annual premium if you are over 45 years. Now a lower cover, even for those under 45 years means lower mortality charges. A higher percentage of premiums go towards investments. Life cover in ULIPs comes with high mortality charges. With minimum cover coming down, more money is available for investments.
Policyholders seeking to revive ULIPs get 3 years instead of 2 years. Its 5 years for non-linked plans. Insurers must intimate policyholders within 3 months of policy lapsation if they want to revive policies.
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