If you stop your life insurance early, you usually have to pay extra fees. But now, the people who make these rules are thinking about reducing these extra fees.
This could be good because it means if you have to stop your insurance early, you might get more of your money back.
In insurance talk, the extra fee you pay for stopping early is called a “surrender charge.”
Recently, the people who make insurance rules in India (IRDAI) suggested a new rule for all types of insurance.
The biggest change might be in a kind of insurance called “endowment.” These policies promise to give you a bunch of money when it’s time,
and sometimes they also give you profits. Let’s see what might be different for people with these policies.
What’s changing in the rules for stopping traditional life insurance early?
The new rules could mean that if you can’t pay for your insurance anymore and need to stop it, you won’t have to pay as much extra.
This is good because you can keep more of the money you paid for the insurance.
Here’s an example: If you decide to stop your policy after paying for two years, right now, you might only get back 30% of the money you paid. But if the new rule happens, you could get back more.
IRDAI also said there will be a limit on how much money you pay for insurance.
If you stop your policy and you already paid more than this limit, you won’t have to pay extra, no matter when you stop.
But they didn’t say what the limit is yet. They tried to explain with an example, but we don’t know the limit for sure.
What’s good about this new rule for people with insurance?
If you think you made a mistake or someone tricked you into getting insurance, or if you can’t pay the yearly cost anymore, you can easily stop your plan.
Someone who knows a lot about insurance said the way things are now makes it hard for people to keep long-term plans.
But if the new rule happens, it could be better for customers. That’s because many people stop their policies, especially the traditional ones, after five years.
The new rules might give these people more money back than before.
For example, a big insurance company called LIC has a lot of policies that people stop, and this new rule could really help those people get more money back.
