By Mr. Sridharan S, Fundsindia.com
In the market,
insurance firms are increasingly introducing online term plans for lesser
premiums to policyholders. This, in one way, is exciting news as it means more
savings.
However, price should
not be the main criteria for choosing something as important as term insurance.
Here are a few
pointers that will help you make the right decision between online &
offline term insurance.
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| Mr. Sridharan, FundsIndia.com |
Low premium..
In my view, low
premium must never be the only criterion for choosing a life insurance term
plan. Before, you fall for the charms of such plans, you will need to look
closely at the fine print.
For starters, the
‘cheap’ premium paid for online term insurance often jumps up by 25 % after the
prospective policyholder undergoes a medical test.
Also, after the
medical test, if the proposer would like to decline the policy, the amount paid
will be refunded to him / her only after the cost of the medical test that was
borne by the insurance company has been deducted.
In some cases, a few
leading insurance firms have started offering online term plans without
conducting any medical test of the prospective policyholder.
This is for term
insurance policies that have a sum assured of up to Rs. 50 Lakh. One important
point to note here is that such a policyholder has to disclose his entire
medical history, and that can be used as evidence in the case of a claim.
Claim Settlement
Ratio..
The claim settlement
ratio for online insurance is not required to be mandatorily disclosed by
insurance companies to the Insurance and Regulatory Development Authority
(IRDA).
As per IRDA
guidelines, such a ratio declared by insurance companies is the combination of
both online and offline insurance plans. Further, the lack of data available on
the claim ratio of online plans hinders its clarity.
As insurance
companies have started offering online insurance plans only from the last 4 to
5 years, early claims will go through high scrutiny before the claim is
settled.
Policyholder
Support..
The objective of a
term plan is to acquire the sum assured amount when the policy holder dies. In
the case of an online term plan, the proposer’s nominee has to coordinate with
the designated call centre for the claim settlement.
In the case of an
offline plan, the advisor / or broker is
the one point contact. He will work on your behalf to help you get the claim
from the insurance company. As per the insurance law, the agent / or broker is
the first underwriter to the customer as he is meeting the insurance buyer.
Insurance is thus, the contract between the
insurance company and the proposer which works on “UBERRIMA FIDE” (i.e. utmost
good faith). Even small details that were missed out at the time of filing the
online application form by the proposer leads to cancellation of claim
proceeds.
Premium Comparison..
The premium of online
term plans varies from company to company and this leads to a lot of confusion
among policyholders. The premium is factored based on various parameters such
as mortality rates, cost of medical tests & marketing costs.
While a few
companies are reducing their cost by offering term insurance without any
medical test of the prospective customer (for up to Rs. 50 Lakh of the sum
assured), such online term plans, in most instances, do not offer additional
riders such as accidental death, Permanent Disability Benefit (PDB) and
critical illness coverage to customers.
To conclude, you must
remember that cheaper premium alone should never be the criterion for choosing
a term plan.
Apart from the
premium, all the above factors should also be considered before signing up for
a term plan. Strongly advocate that offline term plans are best suited for
individuals as it offers an array of beneficial services coupled with guided
advice.
About the authr..
Mr. Sridharan.S
Head - Financial Planning, FundsIndia.com
Mob: +91 99401 16967
Tel : 044 - 4344 3142
Email : sridharan@fundsindia.com
Foe more Details
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