There are tons of Insurance policies available in the market. Which one do I opt for? If you have been reading the news of late, this question should not pop up in your mind. Read this headline carefully – “Investors have lost Rs. 1.5 trillion due to mis-sold insurance policies.” The reason why I said read carefully is not to tell you a breaking news that there has been mis-selling from the insurance agents.
It’s the sheer number – 1.5 lakh crore worth of our money has been wasted in dud insurance policies. I am sure that now for most of us, it’s a no brainer that only term insurance is the true meaning of Life Insurance.If you are looking to buy term insurance, you would have two modes to do that; online mode and offline mode. Online form is increasingly becoming popular because of various reasons. However, there still seems to be a bit of fog left in the path of buying online term insurance. Let’s look at some of the factors based on which you can choose the mode of buying term policies.
Cost is the major factor while term insurance. A lot of online term plans are cheaper by 50-70% (or even more) compared to their counterparts. This is due to couple of factors.
1) There is no intermediary involved in the process. You deal directly with the company; hence the company’s costs reduce.
2) Companies believe that mortality risk is lesser in case of online consumers than offline one’s. As a result, they are ready to offer a lower premium in online mode.
Industry experts believe that such low premiums can bring about a price war in the insurance sector similar to the one in telecom space. It has to be seen whether these premiums are to sustain in the future. Now, what if you had bought a policy at, say, Rs. 20,000 three years back and now you get it for Rs.15,000 for the same sum assured and tenure. We have already received queries regarding consumers who had bought online term plans at higher prices few years back. The answer is pretty simple, stop paying premium for the existing policy and opt for the cheaper one (make sure that other factors are satisfied too).
Online mode definitely gives you more flexibility and more options in choosing the required term plan. However, you need to do a bit of homework while buying online since you do not have the privilege of an agent helping you. This is also a blessing in disguise, since in offline mode you might get a bit lazy and leave it to the agent to the fill the form. There have been cases where agents have misplaced the information while filling the form, either intentionally or by mistake. This could prove costly during claim settlement.
If there is a concern in the consumers’ minds while buying term plans online, it is this. The concern is also justified since there is no proper claims settlement data to be sure of this mode. This is because companies do not segregate online and offline claims ratios. Hence, you cannot be sure of exact number of claims settled online.
If you have disclosed all information rightly, there is no reason for you to be worried about settlement of your claim. IRDA has imposed stringent rules on the insurers, one of them being that they need to reject claims (if any) only within 2 years of purchase of policy. In case your claims are rejected even after proper disclosure of all information, you can approach an insurance ombudsman for justice.
The average sum assured tends to be higher in online mode, because of the lower costs involved as stated earlier. It can also be due to the marketing skills of insurance companies. It’s quite common to see this ad – “1 crore term insurance for just Rs.500/month or Rs.17/day”. More often than not, you would be tempted to purchase a 1 crore cover even when you don’t need it. Also, for online policies, insurers call for medical tests only if the sum assured is more than an minimum amount, say, 50 lakhs or so.
Based on the above factors, online mode for term insurance clearly stands out. It is recommended to calculate the amount of insurance required before purchasing a life insurance policy. Any facts related to family or personal health should be declared (even if it means higher premium). Remember, Insurance is based on the principle “Uberrima Fides”, meaning Utmost good faith.