Loan facility will be mandatory on life insurance policy, know details here

The Insurance Regulatory and Development Authority of India (IRDAI) has made loan facilities mandatory for all life insurance products. This will help policyholders meet their cash-related needs. On Wednesday, the IRDA issued the master circular, which incorporated all of the regulations governing life insurance policies, and stated that the 'free-look' period has been extended to 30 days. Previously, this period was 15 days.

In the 'free-look' period, time is given to review the terms and conditions of the policy. The new master circular follows a similar exercise undertaken by the regulator for general insurance policies. "This is a significant step in the series of reforms undertaken by the insurance regulator keeping in mind the interests of policyholders," IRDA said.

According to the master circular, a partial withdrawal facility has been permitted under pension products. This will help policyholders to meet their specific financial requirements for important life events such as higher education or marriage of children, purchase/construction of residential houses/flats, medical expenses, and treatment of critical illness.

IRDA said that in case of closure of a policy, a reasonable and value-added amount should be ensured for both the policyholders who close it and the policyholders who continue. "If the insurance company does not appeal against the decision of the Insurance Ombudsman and does not implement it within 30 days, then the complainant will have to pay a penalty of Rs 5,000 per day," the circular said.

Insurers were asked to put in place mechanisms to improve consistency, curb mis-selling protect policyholders from financial losses, and enhance long-term benefits for them.