While the Indian market has seen a plethora of protection products, with different features, options, riders, etc., at present, there are many term insurance products in the market with varying terms and conditions. Customers who cannot devote adequate time and energy to make informed choices find it difficult to select the right product. Also, products may not be available for the intended sum assured. To take care of this situation, insurance regulator IRDAI has unveiled the design for a standard, individual term life insurance product, with simple features and standard terms and conditions. It is being hoped that such a standard product will make it easier for the customers to make an informed choice, enhance the trust between the insurers and the insured, and reduce mis-selling as well as potential disputes at the time of claim settlement.

Basic features

The standard individual term life insurance product will be called, “Saral Jeevan Bima”. The insurer’s name will be prefixed to the product name. Life insurers will have to offer the following product mandatorily.

At a basic level, “Saral Jeevan Bima” is a non-linked, non-participating individual pure risk premium life insurance plan. It does the simple job of providing for payment of sum assured in lump sum to the nominee in case of the life assured’s unfortunate death during the policy term.

There will be no exclusions under the product other than the suicide exclusion.

The product will be offered to individuals without restrictions on gender, place of residence, travel, occupation or educational qualifications.

All life insurers will offer the standard product with effect from 1st January 2021.

Plan features and parameters

Minimum age at entry – 18 years

Maximum age at entry – 65 years

Policy term – 5 to 40 years

Maximum maturity age – 70 years

Sum assured – Minimum Rs 5 lakh; maximum Rs 25 lakh (SA would be allowed only in the multiple of Rs 50,000). Insurers have the option of offering Sum Assured beyond Rs 25,00,000 under Saral Jeevan Bima with all other terms and conditions remaining the same, IRDAI has said.

Large sum assured rebate – Possible

Premium payment options – i) Regular Premium; ii) Limited Premium Payment Term for 5 years and 10 years; iii) Single Premium

Mode of premium payment – Regular and Limited Premium payment options:- Yearly; Half Yearly; Monthly (only under ECS / NACH); Single Premium: In Lump sum.

Death benefit – For Regular & Limited Premium Payment policies: Highest of either 10 times of annualized premium, 105% of all the premiums paid as on the date of death or absolute amount assured to be paid on death.

For Single premium policies, the death benefit will be higher of either 125% of the single premium or absolute amount assured to be paid on death.

Maturity benefit – There will be no maturity benefit under the policy.

Waiting period – 45 days from the date of commencement of risk. In the case of the revival of the policy, the waiting period will not be applicable. This policy will cover death due to accident only during the waiting period of 45 days from the date of commencement of risk. In case of death of the life assured other than due to accident during the waiting period, an amount equal to 100% of all premiums received excluding taxes if any, will be paid and the sum assured will not be paid.

Surrender value – Nil

Policy loan facility – Nil

Optional riders – Approved accident benefit and permanent disability benefit Riders

Underwriting and medical requirements – This will be as per the board-approved underwriting policy of the insurer, subject to specified criteria and any statutory requirements.

Interest on delayed payment of premiums – The rate of interest on delayed payment of premiums will be as per the Insurer’s policy for similar products.

RupeeIQ take

We can understand more about the premium cost of this standard term cover when companies launch it. But, the premiums of Saral Jeevan Bima will likely be higher than that of other term plans. This will be because the standard plan does not have many restrictions, and as such, the cover will have to price the risk of taking many people. With restrictions, insurers can price a term product better because they can pick and choose whom to cover and whom to not cover.

It is likely that life insurers may not offer a higher cover than Rs 25 lakh in Saral Jeevan Bima, even though the regulator has kept that window open. A Rs 25 lakh cover is not good enough if you assume that an adequate cover for someone living in a city has to be 20-25 times their current annual income.

We like the fact that Saral Jeevan Bima will have tremendous uniformity in features, benefits, and policy wordings. This will make it easier for customers to buy it. This product can make it simpler for people to buy livelihood protection for their family, in case the life assured dies. Given that the product has a maximum maturity age of 70 years, it basically covers most of the risks a person’s family is exposed if the main breadwinner dies. By 70 years of age, almost all financial liabilities are taken care of.

Kumar Shankar Roy

Kumar Shankar Roy is contributing editor with RupeeIQ. Kumar is a financial journalist, with a functional experience of 15 years. He tracks mutual funds, insurance, pension, PMS, fixed income/debt and alternative investments markets closely. He has worked for The Times of India, The Hindu Business Line, Deccan Chronicle Group, DNA, and Value Research, among others, across different cities in India. He is deeply interested in marrying data insights with actionable opinion. He can be contacted at [email protected].

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