Irda relaxation for minimum sum assured on short-term policies
Lowest limit on sum assured
To make it sure that
life insurance policies offer consumers an adequate cover, Irda mandated a
minimum sum assured of 10 times the annual premium for all the life insurance
policies for individuals below 45 years of age and for individuals above 45
years of age, the minimum sum assured is to be seven times the annual premium.
Earlier, in case of Ulips, the minimum sum assured was
five times the annual premium, but for traditional or non-linked insurance
policies there wasn’t a minimum sum assured threshold.
However, post the regulations this year which will
become effective from October, owing to the insurers’ inability to design such
products, Irda has reduced the sum assured limit to five times for policies
with a term of less than 10 years for all individuals. However, Irda has
mandated that the sum assured or the death benefit at any given point in time
would not be less than 105% of all the premiums paid.
Proviso: Under
section 80C of the Income-tax Act. the sum assured or death cover needs to be
at least 10 times the annual premium to get tax deduction benefits up to Rs.1
lakh.