Is Linking LIC Policies with Aadhaar Mandatory and What Happens If Not Done?

Insurance enthusiasts and policyholders alike have been abuzz since the central government made it mandatory to link Life Insurance Corporation (LIC) policies with Aadhaar. The move, which targets financial transparency and curbs money laundering, has brought about several changes in the insurance sector. Here, we delve into the mandatory nature of this policy and the implications if it is not adhered to.

Introduction to the Requirement

On June 1, 2017, the Central Government through its gazette notification mandated the Prevention of Money-Laundering (Maintenance of Records) Second Amendment Rules 2017. This regulation makes it compulsory for insurers to ensure that all policyholders link their life insurance policies with their Aadhaar and PAN (Permanent Account Number) or Form 60.

What are Aadhaar and PAN?

Aadhaar is a unique 12-digit identification number provided by the Unique Identification Authority of India (UIDAI) for every individual in the country. It is a form of identity verification for various services and transactions, including insurance policies. Meanwhile, the PAN is a 10-digit alphabetic-numerical code used for tax purposes in India, which is mandatory for filing tax returns and conducting financial transactions.

Importance and Implementation of the Regulation

The Insurance Regulatory and Development Authority of India (IRDAI) has directed insurers to implement the Aadhaar-linking policy without waiting for further instructions. This move is crucial to ensure that only legitimate individuals are protected by insurance policies, thereby curbing money laundering activities.

While the Aadhaar and PAN linkage might seem like a new and unexpected process, it is important to note that Life Insurance Corporation of India (LIC) usually collects these details through its agents before issuing policies. Consequently, policyholders should not be confused or alarmed if they are asked to provide Aadhaar and PAN details during the policy application process.

Illustrations and Examples

According to a report by NDTV, Insurance policies will have to be linked mandatorily with Aadhaar. This requirement was communicated by the IRDAI, asserting that for the prevention of money-laundering and maintenance of records, insurance policies need to be linked with Aadhaar.

Specifically, IRDAI guidelines state that Aadhaar and PAN/Form 60 are mandatory for obtaining financial services, including insurance. Form 60, also known as Form 61, is completed by individuals who do not possess a PAN and are required to provide this form when PAN is mandatory for a transaction. This ensures that all insurance policies are linked to a known and authentic identity.

Consequences of Non-Compliance

Failure to link AIM policies with Aadhaar can lead to severe repercussions. As of January 1, 2018, payments for any claim will be banned if a policyholder has not linked their Aadhaar. The deadline for linking during 2017 was December 31, 2017, to prevent any issues related to claim payments.

Key Points:

Mandatory Linkage: All policyholders must link their Aadhaar and PAN with their LIC policies to avail of any services, including claim payments, from January 1, 2018.

Ethical and Legal Reasons: Linking policies is made mandatory to prevent money laundering, a serious offense that undermines the integrity of the financial system.

Consequences of Non-Linkage: If a policyholder does not link their policy with Aadhaar by the deadline, they risk facing bans or delays in claim payments, impacting their financial security.

Conclusion

Given the importance of this rule and its implications on claim payments, it is imperative for all policyholders to ensure their policies are linked with Aadhaar and PAN. Individuals who have not yet done so should immediately contact their LOCAL LIC office to link their policies, preventing any inconvenience or legal issues in the future.

For further clarification or guidance, it is advisable to consult your local insurance agent or visit the official website of the Life Insurance Corporation of India (LIC).