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Reforms are a must in any sector.
Life insurance is no exception. Reforms improve the quality of products and protect the interests of the investors.
Endowment life plans have very high charges during the initial years of the policy. These charges were deducted from the premiums you pay for the endowment life plan.
The reason you avail a life insurance policy is on your/policyholders death your family enjoys monetary benefits.
In an endowment life plan a very high percentage of the premiums you pay goes towards paying the commissions and fees of the life insurance agents.
So what is left for your life insurance?
As per new rules if you are less than 45 years of age you get a minimum death benefit of highest of the following:
- 10 times of annual premium
- Half of the annual premium you pay * term of the policy
- 105% of all the premiums you pay.
As per new rules if you are more than 45 years of age you get a minimum death benefit of highest of the following:
- 7 times of annual premium
- One fourth of the annual premium you pay * term of the policy
- 105% of all the premiums you pay.
If you are young in age, it is perceived that if you die early you would have lesser savings and leave less money for your family to survive. You would need a higher amount of life insurance.
A higher surrender value:
Before the reforms you had to pay at least 3 premiums for your endowment life policy before you could surrender the policy.
You would get 30% of the premiums you paid for the 2nd and the 3rd year on the endowment life insurance policy. You don’t get anything for the premium of the first year.
Post reforms if you surrender your endowment life plan:
If your endowment life plan has a premium paying period of more than 10 years then you can surrender it after paying premiums for 3 years.
On surrendering the policy you will get 30% of the premiums you have paid for the 1st year , 2nd year and the 3rd year of the policy.
If your endowment life plan has a premium paying period of less than 10 years then you can surrender it after paying premiums for 2 years.
On surrendering the policy you will get 30% of the premiums you have paid for the 1st year and 2nd year of the policy.
The commissions of the life insurance agents are linked to the premium paying period of the endowment life policy.
As per the new rules the commissions of the life insurance agents are higher in the initial years if the endowment life plan has a higher premium paying period.
If the endowment life plan has a lesser premium paying term the life insurance agents are paid a lesser commission in the initial years.
Commissions paid to the agents tend to be high in the first year of the endowment life plan and lessen gradually with the passage of time.
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