TOPICS UNDER POLICY

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Policy Loans including Foreclosure
Revival
Alteration
Duplicate Policy
Repository

POLICY LOAN

AloangivenbyaLifeInsurancecompanytoapolicyholderwit
hthe cashvalue
(Surrender
value)ofthepolicyservingassecurity.
lable only under Non-Linked (Traditional) Endowmen
s of Plans, subject to being mentioned in
y Conditions.

CERTAIN BASIC REQUIREMENTS

Loan will be granted only if the Policy has
acquired
Paid up value , as the security for the Loan is
Cash Value(SV) accumulated in the Policy due
to
Premium Payment.
(Cash Value Accumulation happens when the
Policy acquires
Paid Up Value and consequently Surrender
Value)

REVISION OF TWO CONCEPTS (SV

AND PV)

Surrender Value
r Section 113 in The Insurance Act 1938, subst
e Insurance Laws (Amendment ) Act, 2015
26-12-2014

eed)

113. (1) A Policy of life insurance shall acquire

surrender
Value as per the norms specified by the
regulations

REGULATION -35 CHAPTER IX-SURRENDER

VALUE( IRDA NON-LINKED INSURANCE PRODUCTS REG.2013)

Acquisition of Surrender Value under

other than variable insurance products
35. All individual savings and protection
oriented products such as non-linked life
insurance products, and non-linked
pension products, other than pure
protection products such as term
insurance, health insurance and
immediate annuities, shall acquire a
guaranteed surrender value and special
surrender value, if higher. The guaranteed

REGULATION -35 CHAPTER IX-SURRENDER

VALUE (C0NTD..)

35 a. Products with a Premium

Paying Term (PPT) of 10 years or
more:
If all premiums have been paid for at
least three consecutive years, the
policy shall acquire a guaranteed
surrender value, to which shall be
added the surrender value of any
subsisting bonus or guaranteed
additions, as applicable, already
accrued to the policy

REGULATION -35 CHAPTER IX-SURRENDER

VALUE (C0NTD..)

35 b. Products with a Premium

Paying Term of less than 10
years:
If all premiums have been paid for at
least two consecutive years, the
policy shall acquire a guaranteed
surrender value, to which shall be
added the surrender value of any
subsisting bonus or guaranteed
additions, as applicable, already

REGULATION -35 CHAPTER IX-SURRENDER

VALUE (C0NTD

35 c Other than single premium products:

The minimum guaranteed surrender value
shall be the sum of guaranteed surrender
value and the surrender value of the any
subsisting bonus or guaranteed additions,
as applicable, already accrued to the policy.
The guaranteed surrender value shall be at
least: i) 30% of the total premiums paid less
any survival benefits already paid, if
surrendered between the second year and
third year of the policy, both inclusive.

REGULATION -35 CHAPTER IX-SURRENDER

VALUE (C0NTD

ii) Subject to (iii), 50% of the total premiums

paid less any survival benefits already paid, if
surrendered between the fourth year and
seventh year of the policy, both inclusive. iii)
90% of the total premiums paid less any
survival benefits already paid, if surrendered
during the last two years of the policy, if the
term of the policy is less than 7 years. iv) The
surrender value beyond the seventh year shall
be filed by the insurer under the File and Use
for clearance. Such surrender value shall
consider the premiums already paid

REGULATION -35 CHAPTER IX-SURRENDER

VALUE (C0NTD

35 d Single premium products: The

guaranteed surrender value shall be the sum
of guaranteed surrender value and the
surrender value of the any subsisting bonus
already attached to the policy

REGULATION -35 CHAPTER IX-SURRENDER

VALUE (C0NTD
i) 70% of the total premiums paid less any survival benefits
already paid, if surrendered any time within third policy
year. ii) Subject to (iii), 90% of the total premiums paid
less any survival benefits already paid, if surrendered in
the fourth policy year. iii) 90% of the total premiums paid
less any survival benefits already paid, if surrendered
during the last two years of the policy, if the term of the
policy is less than 7 years., , iv) The surrender value
beyond the fourth year shall be filed by the insurer under
the File and Use for clearance. W hile determ ining such
surrende
ii) v) Surrender value of any subsisting bonus already
attached to the policy shall be filed and approved under
the File and Use explicitlyr value the insurer shall
consider the premiums already paid .

REGULATION -35 CHAPTER IX-SURRENDER

VALUE (C0NTD

Every such policy shall show the guaranteed

surrender value of the policy at the close of
each year after the second year/third year, as
applicable of its currency or at the close of
each period of three years throughout the
currency of the policy in the policy document.

REGULATION -35 CHAPTER IX-SURRENDER

VALUE (C0NTD

, iv) The surrender value beyond the

fourth year shall be filed by the insurer
under the File and Use for clearance. W
hile determ ining such surrender value
the insurer shall consider the premiums
already paid and the possible asset
shares on such products.
v) Surrender value of any subsisting
bonus already attached to the policy shall
be filed and approved under the File and
Use explicitly.

REGULATION -35 CHAPTER IX-SURRENDER

VALUE (C0NTD..)

35. f A policy which has acquired a surrender

value shall not lapse by reason of the nonpayment of further premiums but shall be kept
alive to the extent of the paid-up sum insured,
and the paid-up sum insured shall include in
full all subsisting reversionary bonuses that
have already attached to the policy.
35. g.The minimum paid-up value shall be in
accordance with the Section 113 of the
Insurance
Act, 1938
35.
h.The surrender
value shall be the higher of the
guaranteed surrender value and the special
surrender value.

HOW LOAN IS ARRIVED AT

Illustrative Data
Type: Endowment- Non-Par
Date of Commencement (DOC) 30/6/2012
Sum Assured (S.A.)
Rs.3,00,000
Policy Term - 20 years,
Mode of Premium Payment-Yearly
Last Premium paid-30/6/2016
Dt of caculation 13/7/2016
SV Factor- 40 (For Illustative Purpose)

LOAN CALCULATION- AN
ILLUSTRATION

p I : Calculation of Paidup Value (PV)

early premiums have been paid - Policy term 20 yea
1/20
ltiplied by Sum assured
0,000x5/20 ..)
75,000 (Paid Up Value)
render Value( SV) 75,000x40/100 ( 40 is the assum
ctor)
30,000 - 85% payable in case of Paid Up Policy and
% in case of In force Policy
erest (assuming 10% is charged)), will be compound
f yearly

FORECLOSURE OF POLICY LOANS

In cases where Premium payment is discontinued
after availing loan or loan has been granted on a
paid up Policy, and Interest is not paid in both situations,
Life Insurance Company may take Foreclosure Action
This is being done since at one point of time
outstanding Loan and Interest may exceed the
Surrender Value

If contract is continued beyond that point, the

policy value (Surrender Value-Loan plus Interest )
will be nil or negative, but Paid up value is still
payable (after deduction of outstanding Loan and
interest), if Life Assured dies.
To prevent this Insurer will Surrender the policy to
loan in situations explained earlier, which is called
foreclosure.
If there is any amount left as surrender value after
foreclosure action is taken, it is paid to the Life
Assured and is called Balance Surrender Value.

ALTERATIONS
Alterations:
After the policy is issued, the policyholder in a number of cases finds
the terms not suitable to him and desires to change them. The
changes effected on the request
Of Policy Holder is called Alterations
iAlteration in class or term.
Reduction in Sum Assured
Alteration in the mode of payment of premiums
Removal of an extra premium
Alteration from without profit plan to with profit plan
Alternation in name
Correction in policies
Settlement option of payment of sum assured by installments
Grant of accident benefit
Grant of premium waiver benefit under CDA policies

Alterations Not allowed due to adverse selection-eg

Increase in term, Increase in Sum Asured

REVIVAL

Lapsed Policy can be revived, subject to requirements.

Not automatic, but subject to requirements to fresh
underwriting by Insurers
Duty to disclose material facts (Utmost good faith)
recreated at Revival
IRDA (Non-Linked Insurance Products) Regulation2013
defines Revival period as a period of 2 years w.e.f from
FUP. (Applicable to Policies issued on or after 1-1-2014)
Revival can be done only during the life time of the
Life Assured and before the date of maturity

ISSUE OF DUPLICATE POLICY

Policy Bond is required to be preserved as it is an
Evidence of Contract.
When Original policy is reported lost/destroyed
Duplicate Policywill be issued subject to the
following conditions
News Paper Advertisement
Indemnity Bond by Policy Holder along with a person
standing as Surety
Policy Preparation Charges including stamp duty.
Duplicate Policy Process may become redundant in
future

INSURANCE REPOSITORY- A STEP TOWARDS E- WORLD

To collate and keep a safe custody of all the

insurance policies of an individual at a single
location, dematerialization of insurance policies is
conceived.
The insurance policies including the existing ones
can be converted in an electronic form and held
with an Insurance Repository.

Whats in it for Policyholders.....

Convenience
Single Point of Contact
Aggregation and Single View
Safety
Elimination of paper & Storage risks.
Service on demand.
Efficiency & Transparency.
Ease of maintenance.
Potentially Reduced Premium