IRDAI Regulations & Policy Servicing
IRDAI's current rules for servicing a life policy: the free-look and grace periods, revival, surrender value, paid-up status and policy loans, the time limits for payments, and the route a complaint takes.
The framework
IRDAI regulates insurers and protects policyholders' interests. How insurers must treat policyholders on proposals, servicing, claims and grievances is set out in the IRDAI (Protection of Policyholders' Interests, Operations and Allied Matters of Insurers) Regulations, 2024 and the Master Circular of 5 September 2024, which replaced the 2017 regulations. Product conditions sit in the Master Circular on Life Insurance Products of 12 June 2024.
Starting and keeping a policy
A new policyholder has a free-look period of 30 days from receipt of the policy document to return it. Once the policy is running, each premium has a grace period: 15 days for monthly premiums and 30 days for other modes. The policy remains in force during the grace period.
If premiums stop and the policy lapses, it can be revived within the period the policy document allows. For a discontinued ULIP the rule is specific: three years from the date of the first unpaid premium.
Stopping early: surrender, paid-up and loans
Surrender means ending a savings policy early for its surrender value. Under the 2024 Master Circular, a regular-premium non-linked savings policy qualifies for a special surrender value after the first policy year, provided one full year's premium has been received; single-premium policies and those with a premium-paying term under five years qualify immediately. The special surrender value must be at least the present value of the paid-up benefits. Earlier a policy generally had to run two or three years before any surrender value was payable.
A policy that has acquired paid-up value can instead continue as a paid-up policy: no further premiums are due, but the benefits are reduced, typically in proportion to the premiums paid out of those payable. The exact basis is in the policy terms. Pure term plans usually have no paid-up value.
A policy loan facility is mandatory on non-linked savings products that have a surrender value, and the loan is given against that value. Loans are not allowed under ULIPs, and a pure term plan has no surrender value to borrow against. The interest rate is set by each insurer and changes over time.
Payments and complaints
The 2024 framework sets time limits: a surrender or partial-withdrawal request and a free-look refund are each to be paid within 7 days, a death claim settled within 15 days of intimation, or 45 where investigation is needed, and a maturity claim paid on the due date.
A complaint goes first to the insurer, which must resolve it within 14 days. It can be registered and tracked on Bima Bharosa, IRDAI's online portal, which replaced the Integrated Grievance Management System (IGMS). If the complaint is rejected, unanswered for a month or not resolved satisfactorily, the policyholder may within one year approach the Insurance Ombudsman, whose award is capped at ₹50 lakh, or go to a consumer commission.
Rules at a glance
A premium paid late, but in time
Illustration: Rekha pays yearly and her premium falls due on 1 June. Her 30 days of grace end on 1 July, so a payment on 20 June keeps the policy in force without a break. Had she paid monthly, the grace period for a 1 June instalment would have ended on 16 June.
A paid-up sum assured
- Assumptions, for arithmetic only: a non-linked savings policy with a sum assured of ₹10,00,000; 20 yearly premiums payable; 8 paid before premiums stop; the policy terms use the proportionate basis.
- Share of premiums paid = 8 ÷ 20 = 40%.
- Paid-up sum assured = 40% × ₹10,00,000 = ₹4,00,000.
Result. The policy continues without further premiums for a reduced sum assured of ₹4,00,000. The exact basis, including the treatment of bonuses, is in the policy terms.
Key points
- Free-look is 30 days from receipt of the policy; grace is 15 days for monthly premiums and 30 days for other modes.
- Special surrender value is available after the first policy year once a full year's premium is paid.
- A paid-up policy needs no further premiums but carries reduced benefits.
- Policy loans are mandatory on non-linked savings products with a surrender value and not allowed under ULIPs.
- A complaint goes to the insurer first, which has 14 days to resolve it.
Common misunderstandings
- A surrender value no longer needs two or three years of premiums: special surrender value starts after the first policy year once a full year's premium is paid.
- A paid-up policy is not a surrendered policy: it stays in force with reduced benefits and no further premiums.
- A loan cannot be taken on every policy: ULIPs do not carry loans, and a pure term plan has no surrender value.
Questions people ask
How long does a lapsed policy remain open to revival?
For the period stated in the policy document. For a discontinued ULIP it is three years from the first unpaid premium.
Who decides the interest rate on a policy loan?
Each insurer sets its own rate, and it changes over time.
When can the Insurance Ombudsman be approached?
After a complaint to the insurer has been rejected, left unanswered for a month or not resolved satisfactorily, and within one year.
What this lesson relies on
- IRDAI (Protection of Policyholders' Interests, Operations and Allied Matters of Insurers) Regulations, 2024
- IRDAI Master Circular on Protection of Policyholders' Interests (5 September 2024)
- IRDAI Master Circular on Life Insurance Products (12 June 2024)
- Insurance Ombudsman Rules, 2017 (as amended with effect from 10 November 2023)
This lesson was reviewed independently against these sources on 8 October 2026. Rules change: check the current regulation, scheme document or policy wording before relying on any figure. This is education, not advice.