Settlement Option FAQs
Date: April 7th, 2020
Greetings from Tata AIA Life Insurance! We trust and pray that you and your family members are safe and healthy.
IRDAI via its circular IRDAI/Life/Cir/Misc/078/04/2020 dated 4th April 2020, has recommended to allow ‘Settlement Option’ for all Unit Linked policies (except pension) that are due for maturity till May 31, 2020.
1. What is ‘Settlement Option’?
Settlement Option is a feature available in Unit Linked products whereby at the time of maturity, the customer can choose to defer the maturity pay-out and receive periodical payments upto 5 years from the date of maturity. If you do not wish to receive the entire maturity amount as a lumpsum, you may opt to receive it over periodic intervals (from 1 year to a maximum of 5 years).
This feature is available in all Unit Linked products except Pension products.
Customers can choose the period of settlement between One year to Five Years; similarly choose the frequency of pay-out as Monthly, Quarterly, Semi-Annual and Annual.
2. What is the benefit of opting for Settlement Option?
Normally on maturity, the number of units available to the credit of the policy will be encashed at the Net Asset Value per unit as on date of maturity. Thus, the maturity proceeds would depend on the Net Asset Value on a specific date, i.e. the date of maturity.
By choosing the Settlement Option, customers can receive the pay-out as a regular flow of income as per the frequency chosen, instead of taking it lumpsum in one go.
This options helps Customers to reduce the risk of market volatility by receiving payments at regular intervals over a longer time horizon rather than one single fixed maturity date.
Please note that the residual maturity amount will continue to remain invested in the Funds chosen before maturity and thus will be subject to market risks. The NAV may go up or down depending on various factors and forces that affect the economy. The risk will be borne by the policyholder and Tata AIA Life Insurance will not be responsible for any losses that may arise out of your decision.
3. Can the customer postpone the maturity date by opting for this?
No. By choosing the Settlement Option, the customer can only opt to take the maturity proceeds in instalments.
4. Will any charges be deducted during the Settlement Option period?
Yes. Fund Management Charges will continue to be deducted.
5. How does the Settlement Option work?
Here’s an illustration to show how a settlement option works: Your Maturity amount on the maturity date (say April 20, 2020) is Rs.10 Lakhs and the Units are 10000 (i.e. NAV of Rs.100/-). If you choose Period as ‘5 Years’ pay-out option with Frequency as ‘Annual’, the pay-out will happen as follows:
Payout Date Units Indicative NAV Payout Amount Balance Units
April 20, 2020 2000 Rs.100/- Rs. 2 Lakhs 8000
April 20, 2021 2000 Rs.110/- Rs. 2.2 Lakhs 6000
April 20, 2022 2000 Rs.105/- Rs. 2.1 Lakhs 4000
April 20, 2023 2000 Rs.100/- Rs. 2 Lakhs 2000
April 20, 2024 2000 Rs.109 Rs. 2.18 Lakhs 0
The first instalment will be paid on the date of maturity.
The funds will continue to be invested in the same funds that were opted by the policyholder as on date of maturity.
6. Is it mandatory for the customer to opt for the Settlement Option?
No. It is purely the customer’s choice/decision whether to opt for a Settlement Option or take the maturity in lumpsum.
7. What are the means to inform us if you wish to opt for the Settlement Option and what are the requirements?
Normally, Customers are required to inform us a month in advance. Given the special circumstances, for customers whose maturity dates are between 10th April 2020 and 31st May 2020, we will be accepting the requests 2 working days prior to the maturity date. You may write to us at Customercare@tataaia.com from your email id registered with us.
This request must be sent to us at least 2 working days before the date of maturity.
You are required to mention the below:
Period: 5 years, 4 years, 3 years, 2 years or 1 year
Frequency: Annual, Semi-Annual, Quarterly, Monthly.
Please note if you choose 1 year, Annual frequency will not be applicable.
The period and frequency of pay-out must clearly be mentioned. In the absence of period being mentioned, we will not be able to execute your request. In the absence of frequency being mentioned, it will be assumed to be annual.
Register your bank details on - click here
Share a scanned copy of your personalised cheque via email
We will communicate to you before the amount is payable via sms and email.
8. Is it allowed to cancel the Settlement Option after opting for it?
Yes. You may opt for full surrender by writing to us at customercare@tataaia.com from your registered email id. Your request will be processed within 7 working days.
9. Are customers allowed to conduct ‘fund switches’ or ‘partial withdrawal’ during the Settlement Option period?
No. Fund Switch, Partial Withdrawal is not permitted post maturity of policy and as part of settlement option.
10. Whether I can terminate the instalments and opt for the complete withdrawal after the start of periodic instalments?
Yes. Anytime during the 5 years you can opt for the complete withdrawal and the balance units as on the date of option will be encashed at the NAV rate prevailing on that date.
11. Will there be any charges for complete withdrawal?
No.
12. In case of the unfortunate demise of the policyholder during the Settlement Option period, what will happen to the balance maturity amount?
The Settlement Option will cease and the balance maturity amount will be paid to the nominee.
Tata AIA Life Insurance Company Ltd. (IRDA Regn. No. 110 •CIN:U66010MH2000PLC128403. Registered & Corporate Office: 14th Floor, Tower A, Peninsula Business Park, Senapati Bapat Marg, Lower Parel, Mumbai 400013. Trade logo displayed above belongs to Tata Sons Ltd and AIA Group Ltd. and is used by Tata AIA Life Insurance Company Ltd under a license. For any information including cancellation, claims and complaints. Please contact our Insurance Advisor/Intermediary or visit Tata AIA Life's nearest branch office or call 1-860-266-9966 (local charges apply) or write to us at customercare@tataaia.com. Visit us at www.tataaia.com or SMS "LIFE" to 58888.L&C/Misc/2020/Apr/136