Simplifying Life Insurance in India
IRDAI Life Insurance Guidelines in 2025
Life insurance affords protection and peace of mind for policyholders and their families.
In India, the Insurance Regulatory and Development Authority (IRDAI) guarantees that life insurance plans are clear and flexible for all individuals. IRDAI periodically updates its laws and guidelines to improve the responsiveness of life insurance plans to policyholders.
Let’s find out the IRDAI life insurance guidelines for 2025 so that you can stay updated and make sound financial decisions, avoid common dangers, and maximise the benefits of your life insurance plans.
Table of Contents
What are IRDAI Guidelines for Life Insurance in 2025?
Below are the primary guidelines set by IRDAI for life insurance in 2025:
Increased Withdrawal Limit
Previously, policyholders could withdraw one-third of the entire corpus in pension plans. This restriction has now been extended to 60%. However, only one-third of this withdrawal is tax-free, unlike the National Pension System (NPS), where 60% is tax-exempt.Part Withdrawals Post Lock-in Period
Portion withdrawals are now permissible for plans with a five-year lock-in. Policyholders may withdraw 25% of the entire fund value up to three times throughout the policy lifetime.Investment Flexibility
Policyholders can now invest in shares for larger returns or choose assured benefits. Younger investors who are willing to take chances in the hopes of earning bigger returns will find this particularly beneficial.Annuity Open Market
Policyholders may now purchase annuities from the open market, which guarantees competitive rates. Additionally, they have the authority to allocate up to 50% of the investible corpus, which was previously not permitted.Improved Surrender Value
Policies will now obtain a guaranteed surrender value after two years of premium payment instead of three. Initially, 30% of the sum is guaranteed, growing gradually to 90% as maturity nears.Reduced Premium Flexibility
Policyholders encountering financial problems may lower premiums by up to 50% after the fifth policy year while keeping the insurance valid. This assists in challenging financial situations.ULIP Cover Changes
The ULIP minimum cover has been reduced from 10X the yearly premium to 7X. However, plans should not be less than cowl at ten instances of the every-year premium to take full advantage of the tax advantages under Section 80C and Section 10(10D) of the Income Tax Act.Extended Policy Revival Period
Policyholders have expanded deadlines for reactivating expired policies. ULIPs may be revived after three years (formerly two), whereas non-linked policies can be revived within five years. Insurers must also inform policyholders within three months of the policy's lapse.
These modifications expand flexibility, improve benefits, and minimise policyholders' financial stress, making life insurance more responsive to individual requirements.
Why is Compliance with the IRDAI Guidelines Important for Life Insurance Companies in 2025?
Policyholder Protection
IRDAI rules emphasise protecting policyholders through fair and ethical practices. Insurance companies must keep their promises, be honest, and have grievance redress processes in place. Compliance guarantees the fair treatment of customers and the payment guarantee they make.Market Stability and Trust
With capital requirements, solvency rules, and regular audits, IRDAI safeguards insurance companies’ cash flow. This increases the public’s trust in the insurance sector, which is critical to market growth. Failure to adhere to these laws can result in market disruption and customer loss.Legal and Operational Integrity
By adhering to IRDAI rules, insurers and intermediaries stay within the law without penalty or lawsuit. This also helps companies have good operating practices so everyone is equal and competitive.Privacy and Data Security
Adherence to IRDAI's data security guidelines is essential as digitisation increases. Insurance firms must put strict cybersecurity measures in place to protect policyholder data and stop breaches and illegal access.What are the Points to Consider When Purchasing Life Insurance in 2025, as per IRDAI?
Sufficient Coverage
Make sure the coverage level meets your family's financial requirements while you are away. Experts advise getting coverage at least 10–15 times your yearly salary. For accurate estimates, use an online life insurance calculator. Choose an amount that strikes a compromise between cost and protection.Choose a Policy Type Based on Your Objectives
Various life insurance plans meet certain demands. For example, term insurance offers extensive coverage at affordable rates, but it doesn't provide maturity benefits. Endowment plans put life insurance and savings together, while ULIPs combine insurance protection with investment development. So, choose a kind of coverage based on your present and future financial goals.Tenure of Policy
Ensure your family is covered throughout your working years by selecting a coverage tenure that lasts until retirement. Term plans cover a certain period, but whole life insurance policies cover up to 99 years.Credibility of the Insurer
Examine the insurer's customer feedback, solvency, and claim settlement ratios. Positive evaluations show a seamless experience and effective service, while a high claim settlement ratio and solvency show dependability.Riders for Additional Benefits
You can add riders to your insurance to improve it, such as premium waivers, accidental death benefits, or critical sickness coverage. These add-ons provide further security for a small fee and guarantee total financial stability.What are the IRDAI Guidelines for Life Insurance Claims in 2025?
Prompt Submission of Claims
Report the insured event or the insured's death to the insurance company as soon as possible. It's best to notify the insurer immediately since reporting delays might complicate the claim procedure.Appropriate Records
Send in the necessary paperwork, which usually consists of a filled-out claim form, a death certificate for death claims, a policy paper, medical records (if any), and an FIR or post-mortem report (if the death was unintentional). To prevent delays, make sure all documentation is correct and comprehensive.Respect for the Terms of the Policy
The policy's terms and conditions, including any exclusions from coverage, must be followed when filing a claim. For instance, some plans won’t cover fatalities brought on by certain high-risk hobbies or suicides that occur during the first year.Details of the Nominee and Insurable Interest
Only the nominee or beneficiary specified in the insurance may submit a claim. To prevent disagreements or issues throughout the claim procedure, ensure the nominee's information is updated throughout the policy's term.Steps to Claim Your Life Insurance in 2025, as per IRDAI
Here are the steps to follow when claiming your life insurance in 2025:
Step 1: Notify the insurance company about the claim promptly to initiate the settlement process. Obtain the claim intimation form online or from the nearest branch.
Step 2: Fill out the claim intimation form and provide required details like the policy number, insured's name, date and reason of death, and nominee’s ID.
Step 3: Collect supporting documents, including the policy document, death certificate, and proof of identity, as specified by the insurer.
Step 4: Submit the completed claim form and documents to the insurer. Ensure all information is accurate to avoid delays.
The IRDAI requires insurance providers to resolve claims within 30 days of obtaining all required paperwork. The procedure must be completed in 90 days if more research is required.
Documents Required for Life Insurance Claims in 2025, as per IRDAI
To claim your life insurance in 2025, you will need the following documents:
Common Reasons for Life Insurance Claim Rejection, as per IRDAI
Some of the most common reasons for life insurance claim rejection are:
Failure to Provide Accurate Information
One of the main reasons claims are rejected is that they lack accurate or sufficient information. Risk assessment and premium rates are based on age, occupation, health issues, and medical history. Claim denial may result from any purposeful or negligent misrepresentation or omission.Policy Ignorance Because of Non-Payment
Your nominee will not receive any death benefits if the policy becomes inactive due to a lapse brought on by missing premium payments. Even during the grace period, many policyholders inadvertently skip payments.Not Designating or Revising Nominee Details
Problems during claim settlement may arise if a nominee is not appointed or their information needs to be updated. If a legal beneficiary or the nominee is undecided, the claimant might need to submit proof of their relationship with the policyholder.Unreported Health Examinations
Medical examinations are used by insurance companies to verify an applicant's health, especially for high-risk or older coverage plans. If the death is connected to an unknown disease, avoiding these tests may result in claims being denied.Postponement of Claims Submission
Successful settlement requires prompt claim filing. If the claim remains unacknowledged following the policyholder's death, the insurer may investigate it.Covering Up Current Life Insurance Plans
Refusal may occur if current life insurance coverage is kept a secret. Insurers consider your whole life coverage when calculating your qualifying amount guaranteed under new plans.Exclusions from Policy
Every insurance policy has exclusions that list situations in which claims won't be paid, such as drug overdose, suicide within the original policy period, or accidents involving drunk driving.IRDAI-derived Tips to Avoid Life Insurance Claim Rejection
To avoid life insurance claim rejection, follow these tips:
Provide All Relevant Information: Failure to provide information will lead to disputes that may be generated from claims brought out for nondisclosure.
Be Punctual with Premiums: Ensure that insurance premiums are paid on time to avoid losing coverage and the claim being rejected.
Ensure Nominee Requirements are Ready: Complete the nominee details frequently to ensure the claim is settled easily without unnecessary complaints.
Recognise Policy Exclusions: To prevent claims for uncovered incidents, get familiar with the policy's exclusions.
Check Your Policy Regularly: Regularly update your policy to ensure continuous coverage and keep up with life changes.
Various Types of Life Insurance Policies in 2025 Approved by IRDAI
Here are the different types of life insurance policies that you can choose from:
Whole Life Insurance Plan
A whole life insurance plan provides coverage for the policyholder’s entire life as long as premiums are paid. It offers lifelong protection and also builds cash value over time, which can be borrowed against or used to pay premiums.Term Life Insurance
This simple yet reliable coverage pays out if the policyholder passes away within the policy term. Unlike whole life insurance, it does not build cash value over time, making it more affordable but with limited long-term benefits.Unit Linked Insurance Plan (ULIP)
A ULIP is a life insurance product that combines coverage with investment in market-linked funds like stocks or bonds. It offers flexibility to switch between funds based on market conditions and the policyholder's goals. ULIPs also provide tax benefits but come with costs like fund management fees, which can impact returns.Guaranteed Plan
Guaranteed plans provide savings and life insurance. They provide a cash payment at the end of the policy term, even if there are no claims. This plan is good for those who want to save money and buy insurance. These plans can be divided into financial plans and non-profit plans.Money-Back Plan
Money-back plans return some amount of the sum assured to the policyholder at intervals during the insurance period as Survival Benefits. Their maturity proceeds pay what is guaranteed, the balance of which is still outstanding. If the policyholder passes away during that time, the nominee receives the entire sum insured.Retirement Plan
As the name suggests, a retirement plan allows policyholders to create a corpus for their life post-retirement. Monthly premiums are paid during working years, and the accrued money is turned into an income stream at retirement. Death benefits are included in retirement plans to ensure the security of the beneficiary in case the insurance policyholder dies.Child Insurance Plan
Child insurance plans are intended to facilitate future expenses, including education and marriage. These arrangements combine investment with insurance, so they pay a lump sum as compensation if an insured person dies prematurely in their youth. Any money raised could fulfill the child's future wealth ambitions.Group Insurance Plan
Group insurance protects a group of persons, generally members of an organisation or a corporation's personnel. Under a single policy, these plans give life insurance benefits to a maximum of 10 members. Nonetheless, coverage lasts as long as the individual is a member of the organisation and ends when they leave, though some plans allow continued coverage.Savings and Investment Plan
Savings and investment plans combine investment vehicles with life insurance. These plans offer life insurance and allocate money towards long-term investment goals. With certain maturity benefits, they are great for anybody seeking both financial security and investment growth.What is the Meaning of “Rule of Thumb” in Life Insurance?
Purpose
To offer a straightforward method for individuals to approximate the amount of life insurance required without detailed financial analysis.
Common Examples in Life Insurance:
- 10-12 Times Annual Income: Multiply your yearly income by 10 to 12 to cover dependents' expenses and financial goals.
- Human Life Value (HLV) Method: Based on future earnings and economic contributions until retirement.
- DIME Formula: Considers Debt, Income replacement, Mortgage, and Education costs to calculate coverage.
- 50-30-20 Rule: Adjusts life insurance to reflect your current lifestyle and savings priorities.
Limitations
It does not account for unique personal circumstances like existing savings, inflation, or special family needs. Further, it may underestimate or overestimate the actual requirement.
How Can This Rule Be Used to Determine Your Life Insurance Coverage Needs?
When your life ends, you can leave a lump sum to family and friends as part of your life insurance. However, determining the extent of coverage you require can be challenging. While the process may seem straightforward, accurately calculating your required amount can be challenging due to fluctuations in demand, inflation, and other factors.
The following four simple steps will help you determine the appropriate level of life insurance coverage.
Method 1: Human Life Value (HLV)
This approach determines your economic contribution to your family. It considers your responsibilities, assets, and potential profits. Essentially, this figure is the amount your family would lose if your life were cut short. Knowing this lets you determine how much coverage you need to replace that possible loss.Method 2: Income Replacement Value
This approach is simple. Your present salary and the number of years until retirement determine how much insurance you need. For instance, if you earn ₹5 lakh annually and want to work for another 20 years, your insurance should pay ₹1 crore (₹5 lakh x 20 years).Method 3: Analysis of Needs
This approach entails figuring out how much your family will spend until the youngest becomes an adult. Considerations include your dependents, obligations (such as debts), the cost of your children's education and marriage, and your desired level of life. The coverage you need is the amount that remains after deducting your current assets from the total.FAQs on IRDAI Life Insurance Guidelines in 2025
What are the key changes in the IRDAI life insurance guidelines for 2025?
The key changes include increased withdrawal limits, improved surrender values, and greater investment flexibility.
How does the increased withdrawal limit in the IRDAI life insurance guidelines affect policyholders?
Policyholders can now withdraw up to 60% of their pension corpus, providing more financial flexibility during retirement.
What is the new policy on part withdrawals after the lock-in period according to the IRDAI life insurance guidelines?
After a five-year lock-in period, policyholders can withdraw up to 25% of their fund value three times throughout the policy's lifetime.
Are there any changes regarding premium payments in the IRDAI life insurance guidelines?
Yes, policyholders facing financial difficulties can reduce their premiums by up to 50% after the fifth policy year.
What does the new guideline say about ULIP minimum cover under the IRDAI life insurance regulations?
The minimum cover for ULIPs has been reduced from 10X to 7X the annual premium, but full tax benefits still require a cover of at least 10X.
How has the policy revival period changed in the IRDAI life insurance guidelines for 2025?
The revival period for ULIPs is now three years, while non-linked policies can be revived within five years.
What are the implications of the IRDAI life insurance guidelines for senior citizens seeking life insurance?
Senior citizens can now purchase life insurance policies without any upper age limit, increasing their options for coverage.
How quickly must insurers settle claims under the new IRDAI life insurance guidelines?
Insurers must settle death claims within 15 days if no investigation is needed and within 45 days if an investigation is required.
What is meant by 'insured event' in life insurance policies according to IRDAI regulations?
An insured event refers to a specific occurrence, like the death of the insured, that triggers a claim under the policy.
Will e-insurance policies be mandatory under the new IRDAI life insurance guidelines?
Yes, all insurance policies must be issued electronically, although customers can request physical copies if they prefer.
Important Guides Related to Life Insurance
Disclaimer
The information provided on this page is for informational purposes only and is sourced from publicly available resources. It is not intended to serve as professional advice or a recommendation.
All policy details, benefits, coverage, premiums, and other figures mentioned are illustrative and subject to change based on individual requirements, eligibility, product terms, regulatory changes, and other factors. Guaranteed returns, if applicable, are subject to policy terms, conditions, and timely premium payments.
Customers are advised to review the policy documents, terms and conditions, and consult relevant experts (such as financial or tax advisors) before making any decisions. For a detailed disclaimer, please refer to our Life Insurance Disclaimer.
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Click here for Life Insurance Policy Wordings.Disclaimer
- This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
- All the figures reflected in the article are for illustrative purposes. The premium for Coverage that one buys depends on various factors including customer requirements, eligibility, age, demography, insurance provider, product, coverage amount, term and other factors
- Tax Benefits, if applicable depend on the Tax Regime opted by the individual and the applicable tax provision. Please consult your Tax consultant before making any decision.
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