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Have you also taken an insurance policy? If you surrender it before maturity, how much money will you get? For this, LIC has asked IRDAI to amend the new rules. Read this news...

The country's largest insurance company, Life Insurance Corporation of India (LIC), has asked the insurance sector regulator Insurance Regulatory and Development Authority of India (IRDAI) to amend the new rules made for determining the surrender value of insurance policies. This statement of LIC has come at a time when less than a month is left for the new rules for determining the surrender value to be implemented in the country.

When a person closes his insurance policy before maturity, then he gets only the surrender value of his insurance policy in return. However, for this also most insurance companies follow the lock-in period rule of 3 years. That is, if a person closes his insurance policy before 3 years, then he does not get any surrender value.

New rules approved in June 2024

IRDA recently approved new rules related to surrender value. After several rounds of long discussions with insurance sector companies, the insurance regulator issued its final guidelines in June 2024. Despite this, LIC has now asked IRDA to amend these rules.

According to a CNBC report, IRDA has increased the surrender value in the new guidelines. Now it will be 70 to 75 percent of the premium, whereas earlier customers used to get only 30 percent of the amount on surrendering the insurance policy. In this way, the new guidelines almost double the benefits of the insurance customer. LIC has demanded amendment in the calculation of surrender value from IRDA.

How is surrender value calculated?

Suppose you have bought a life insurance policy for 10 years. Its sum assured is Rs 2 lakh, according to that your annual premium is around Rs 20,000. On maturity you get a bonus of Rs 1 lakh and your total return becomes Rs 3 lakh. Then its sum assured value i.e. the insurance amount is calculated by this formula.

Number of premiums paid

_____________________ X Return of policy on maturity Premiums paid

When surrender value is to be calculated, a cushion of 50 basis points is included in the old rules. For this, the 7 percent yield on 10-year government bonds is considered as the basis. Now LIC has amended the new rules and asked to increase the cushion by 50 basis points. Also, benchmarking has been asked to be done according to the policy and insurance plan instead of fixing a single interest rate by considering the yield of 10-year government bonds as the basis.

At present, insurance companies invest about 70 percent of the total money coming in the insurance plan in 30-year government bonds. At the same time, the current yield on 10-year government bonds is up to 6.86 percent.