All you wanted to know about Saral Jeevan Bima

A term life insurance product offers financial stability and comfort to a family on the death of the bread-winner. While term plans are supposed to be simple, in practice, Indian insurers add quite a few features to them which makes the choice difficult. To address this, the insurance regulator, IRDAI, has come out with guidelines for Saral Jeevan Bima. All life insurers must offer this product from January 1, 2021.

Similar to the standardised health insurance product Arogya Sanjeevani, Saral Jeevan Bima is a standard term insurance policy for individuals. It is a pure risk plan (non-linked non-participating) where the coverage and payout are the same across insurers. The name of the policy too is to be the same, but prefixed by the name of the insurer. As per the guidelines, the product is to be offered to individuals without restrictions on gender, place of residence, travel, occupation or educational qualifications.

Similar to any other term plans in the market, in Saral Jeevan Bima, too, the sum assured will be paid upon the death of the policyholder, to the nominee.

A term insurance is a must-have life cover for an individual. The main objective of launching a standard term product is to ensure that it is simple to select and easy to purchase.

While the on-boarding and underwriting process could vary with insurers, any individual aged between 18 and 65 years can buy this policy. The policy term is for five to 40 years and he/she has the option to pay premium regularly, or for a limited period (5-10 years), or as a single payment (lumpsum). The premium payment can be made either monthly, quarterly, half-yearly or yearly. The minimum sum assured (SA) is ₹5 lakh and the maximum cover can go up to ₹25 lakh.

The riders are also limited, restricted to accident benefit and permanent disability. The standard term plan offers only level cover where the sum assured remains constant along with the premium amount throughout the life of the insured.

Saral Jeevan Bima could come in handy for those policyholders looking for plain vanilla term covers. The product offers lumpsum payout only, unlike other term plans in the market. The nominee will receive, in case of death of policyholder, the higher of: 10 times the annualised premium, 105 per cent of all premiums paid as on date of death, or absolute SA. In the case of single premium policies, higher of either 125 per cent of all premiums paid or absolute SA.

But on the downside, unlike other term plans, Saral Jeevan Bima comes with a waiting period of 45 days from the date of commencement of the policy. This policy will cover only death due to accident during the waiting period. In case of death of policyholder other than due to accident during the waiting period, then the insurer will pay only 100 per cent of all premiums received (excluding taxes) to the nominee.

There is no maturity benefit or return of premium paid if the policyholder survives the policy term.

Given that existing term insurance products are competitively priced with various riders and payout options, not many insurers will be keen to push this standard term product to their customers. Also, it is left to the insurers to increase the cover beyond the maximum limit of ₹25 lakh; it remains to be seen if this will be done. Also, while the features of this plan are uniform, the premiums are to be decided by each insurer.

The product is Saral but the devil could be in the detail.

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