These are tough times, and not just for global health, but also for global finance. While industries are gearing up for an inevitable recession, personal finances are also under threat. Industries like aviation, tourism, media, and IT in particular are witnessing major pay cuts and layoffs. Companies can neither afford to pay bonuses nor keep spending the same amount on retaining employees, in some cases. As per the National Sample Survey and Periodic Labour Force Surveys in March, over 136 million non-agricultural jobs are at immediate risk.
In such a situation, the working class is making significant adjustments to its financial planning. Hence, it is evident that regular payments like premiums will be difficult to maintain. The RBI had announced an EMI moratorium for loans due to this very reason. In a similar step, the IRDAI (Insurance Regulatory and Development Authority of India) had also announced an extension of the grace period for renewal of life insurance policies, not once but thrice since the lockdown began.
Previous announcements regarding life insurance policy extension
The first life insurance grace period extension announcement was made on March 23, when the IRDAI had declared that an additional grace period of 30 days would be given to policyholders whose premium was due in March and April.
The IRDAI added that insurers should continue operations via alternate modes such as telephonic and digital. All insurers had also been asked to display information about the functioning of their offices and arrangements for premium payments, renewal, claim settlement, and service requests, etc. on their websites.
On April 4, the IRDAI made yet another announcement for life insurance grace period extension.
Latest extension of grace period for life insurance policies to 31st May 2020
In the latest development, on the 10th of May, 2020, the IRDA made a similar announcement once again, in an effort to provide relief to insurance policyholders and help them continue with their policies.
The IRDAI declared that the grace period for premium payment or renewal which was due in March, has now been pushed till May 31, in the light of the extended lockdown.
Why the life insurance policy extension
The main objective of the life insurance grace period extension is to ensure that policyholders are able to retain their policies by paying premiums within the grace period. This decision was made because of a number of policyholders finding it difficult to make premium payments within the due date in March, as a result of the lockdown and the ensuing problems. Life insurance is an essential financial instrument at this time and it is crucial to not lose the security it provides.
The IRDAI also encouraged insurers to collect payments online, as all insurers have online facilities. Policyholders have also been encouraged to avail online facilities and avoid trips to the office so as to follow lockdown and social distancing norms.
This is indeed a good move on the IRDAI’s part. Given all the uncertainty and the health scares looming around us, a term insurance policy is one of the things that can provide us the sense of security we need. It is important that you try to maintain your policy by renewing it within the extended date. In case you don’t have a policy yet, you can get one within minutes, at Finserv MARKETS.
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