Policy Exchange Review (2025): 1 Year Experience

Table of Contents

What is Policy Exchange?

Policy Exchange (ThePolicyExchange) is an Indian insur-tech platform that lets investors buy pre-owned life insurance policies through a legal process called policy assignment. By doing so, investors can potentially earn 9–14% annual IRR, sometimes tax-free, while insurance companies and original policyholders also benefit.

In short:

Policyholders recover value from unwanted or lapsed policies.
Investors buy at a discount, assume premiums, and get maturity benefits.
Insurers retain active policies instead of lapses.

We had done a detailed review of the platform in the past. Here is the link to the article.

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What is Insurance Policy Assignment?

Policy assignment is the legal transfer of rights, title, and interest of a life insurance policy from the original policyholder (assignor) to another person (assignee). Once assigned, the new owner assumes full control of the policy benefits.

In India, policy assignment is governed by Section 38 of the Insurance Act, 1938, which makes it a transparent and regulated process.

Types of Assignment

Absolute Assignment
- The complete transfer of policy rights from assignor to assignee.
- The new owner gets maturity/surrender value and all rights, except the death benefit (which remains tied to the insured life).
Collateral Assignment
- The policy is transferred as security for a loan or obligation.
- Once the loan is repaid, rights revert back to the original policyholder.

Why Assignment Matters for Investors

Unlocks value: Policyholders who no longer wish to continue their policies can monetize them instead of surrendering at a loss.
Enables secondary market: Investors can step in, take over the policy, and benefit from the maturity payouts.
Legal and regulated: Assignments are recorded by the insurance company, and investors get official confirmation of ownership.

Example

Suppose a policyholder has already paid 7 years of premiums on a 15-year plan but wants to exit.

If they surrender, they may get just ₹4 lakh back (lower than total paid).
Through assignment, an investor can step in, pay the surrender value + future premiums (say ₹7.5 lakh total), and eventually receive the maturity value (say ₹15.3 lakh).
This results in an IRR of 12%+ for the investor.

Policy Assignment vs. Surrender

Aspect	Policy Assignment	Policy Surrender
Owner	New investor/assignee	Original policyholder
Value Received	Full maturity/surrender value at end	Immediate surrender value (usually lower)
Returns	Higher IRR (9–14%) for investor	Loss compared to premiums paid
Legal Backing	Section 38, Insurance Act	Section 35, Insurance Act
Use Case	Alternative investment opportunity	Exit option for policyholder

Why Is This Investment Different?

Unlike traditional FDs or mutual funds tied to interest rates or market risk, Policy Exchange offers:

9–12% IRR, sometimes higher.
AAA-rated backing and regulated under IRDAI.
Direct ownership of the policy with the insurer.
Possible tax-free status depending on policy type and date.

This makes it an attractive alternative investment option in India for those seeking high fixed returns with moderate risk.

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How Policy Assignment Works (Step-by-Step)

Policyholder decides to discontinue or surrender the policy.
Policy Exchange lists it for assignment.
Investor buys at surrender value, takes over future premiums.
Ownership transfers legally under Section 38 of Insurance Act.
The investor receives maturity or surrender value at the end.

Security and Transparency

Policy Exchange reduces risk through:

IRDAI-regulated framework – assignments are fully legal.
Funds were shifted to fixed-income securities (yielding 7–8%) to protect against market volatility.
No hidden charges – investors receive the entire maturity value.
Independent ownership – investors deal directly with insurers, so even if Policy Exchange ceases, rights remain intact.

Tax Treatment of Returns

One of the biggest attractions is tax efficiency. Here’s how it works:

ULIPs before Feb 2021 → Tax-free.
ULIPs after Feb 2021 → 12.5% LTCG tax.
Traditional policies before Apr 2023 → Tax-free.
Traditional policies after Apr 2023 → Maturity value added to taxable income.

For investors in the 30% tax slab, this difference is huge. A tax-free IRR of 12% is equivalent to a 16–17% pre-tax return.

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Example Return Calculation

Suppose you invest ₹7.5 lakh in a pre-owned policy with 8 years left:

Investment (including future premiums): ₹7,53,000
Maturity Value: ₹15,31,000
IRR: ~12% (tax-free, if conditions met)

This is significantly better than an FD or bond yielding 6–7% taxable returns.

Personal Experience and Performance

We invested in August 2024 in a max policy that was yielding 13.9% IRR based on the assignment value. The investment process is digital.

As the policy is transferred from another individual, transferring money to that person’s account is a manual step that can be automated in the future.

My capital was deployed in the Max Secure Fund, which is predominantly a Sovereign debt fund with AAA corporate bonds. I was able to achieve INR 214,000 by the end of the period, which is higher than the tentative amount projected in the MIS given to me. My actual IRR has become 15% instead of

I had to pay the next premium by 26 Aug 2025 or they would transfer the capital to the discontinuance fund on that date, yielding 4%. To avoid that, I invested another 50,ooo on 22nd August so that I could yield the debt fund returns.

My total exit value will become approximately 280,000, and the IRR would be 16% tax-free. These are fantastic returns considering the underlying portfolio is super low risk. To achieve such returns in bonds, you have to take excessive risk.

Date	Amount
08-10-2024	-1,63,565
26-10-2025	-50,000
26-10-2026	2,79,840

IRR	16%

Based on my initial experience, I plan to invest in a few more policies with a target yield of 11% across various maturity profiles. This is an interesting asset class where the performance has very low correlation to other assets and hence will improve overall portfolio performance!

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FAQs About Policy Exchange

Q. What is Policy Exchange?
Policy Exchange is an Indian insure-tech platform that allows investors to buy pre-owned life insurance policies via assignment, offering ~9–14% returns.

Q. Is Policy Exchange legal in India?
Yes. It works under Section 38 of the Insurance Act, 1938, and all transactions follow IRDAI regulations.

Q. How much return can investors expect?
Typical IRR is 9–12%, and in some cases up to 14%, depending on the policy and tax treatment.

Q. Are returns tax-free?
Yes, for policies issued before certain cut-off dates (ULIPs before Feb 2021, traditional before Apr 2023). Otherwise, LTCG or income tax applies.

Q. Is my investment safe if Policy Exchange shuts down?
Yes. Ownership is directly with the insurer, so your rights remain intact.

Q. Who should invest in Policy Exchange?
Investors seeking safe, long-term, inflation-beating returns, with the ability to commit to future premiums.

Q. Do investors get a death benefit too?
No, only maturity/surrender value. The death benefit stays with the original insured.

Q. Can policies be liquidated early?
Yes, via surrender, although the IRR may be reduced.

Q. Are all policies eligible?
Yes, assignments are standardized across insurers.

Risks to Consider

While promising, some risks remain:

Premium Commitment – missing future premiums could harm returns.
Liquidity – policies are long-term; early exit reduces IRR.
Tax Rules Can Change – future budgets may alter exemptions.
Startup Risk – Policy Exchange is a young company.

Verdict: Is 14% Return Real?

Yes, double-digit tax-free returns are possible, but only under the right conditions:

Policy meets tax-exemption rules.
The investor holds till maturity.
Premiums are paid on time.
The chosen insurer is strong and reliable.

For long-term, fixed-income investors, Policy Exchange could be a smart diversifier in a portfolio, offering returns far better than FDs or bonds.

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Should You Invest?

Consider Policy Exchange if you are:

Looking for safe, inflation-beating returns.
Comfortable with a long-term horizon.
Aware of tax rules and risks.
Diversifying into alternative investments in India.

✅ Final Take: Policy Exchange introduces a unique, regulated way to earn 9–14% tax-efficient returns through insurance policy assignment. With transparency, fixed returns, and direct ownership, it’s an option worth exploring for savvy investors.