The new and improved traditional insurance plans

In today's uncertain market, an investor searches for a product that offers safety of capital and helps build a steady corpus, which has traditional insurance plans an attractive option. What's more? The regulator has revamped the product completely and made it an even better buy. The new plans have a minimum sum assured and death benefit criterion and offer a minimum guaranteed surrender value. Irda has also regularised the commission structure which are now linked to the premium payment tenure.

Policies with a term of five-years can have a maximum 15% of the annual premium as first year commissions, while plans with 10-year premium paying term have a 30% cap and 35% for policies whose tenure is 12 years and more. For single-premium and pension products, the caps are 2% and 7.5%, respectively. The trail commissions have also been capped as well-7.5% in 2nd and 3rd years and 5% in the subsequent years.

There is also greater focus on protection in the new plans. The minimum death benefit criterion has also been linked to policy tenure and the age of the policyholder. For regular premium policies whose tenure is 10 years and above and the individual buying the product is age is less than 45 years, on death, the insurer will now have to payout at least 10 times the annual premium to the family. If you are above 45 years of age, the death benefit will have to be at least seven times the annual premium. For policies whose tenure is less than 10 years, the sum assured on death has to be at least five times the annual premium.

In case you plan to buy a single-premium plan, the minimum sum assured on death has to be at least 125% of the premium for people below 45 years and 110% for older policyholders.

The revamped plans also guarantee a higher surrender value. The minimum guaranteed surrender value will be 30% of all premiums paid going up to 90% of the premiums paid in the last two policy years. You will become eligible for a surrender value after paying premiums for two years in case the premium-paying term is less than 10 years. For policies with longer premium-paying term, you are eligible to a surrender value after three years.