Spend, Save and Invest Smartly
A new war is upon you. A war to catch your attention and loosen your purse strings. Online retail is here to stay and its new weapon…A race to the bottom in prices.
Brick and mortar stores are running for their lives. Products online are being sold in seconds. Deep discounts (Products sold below the cost of manufacture) are the new weapon.
Can life insurance be far behind? Term life insurance policies are available online at a price far cheaper than what your life insurance agent is selling you. You’re tempted to buy…But should you buy a cheap online term insurance plan?
Ever wondered why term life insurance policies are available online at a discount of 50-60% compared to the one sold by your life insurance agent? The answer is simple..... Cost.
The Insurer (Company which sells the policy) does not require a life insurance agent to come to you and persuade you to buy the term life insurance plan. The Insurer simply offers the term plan online. The Insurer saves about 25% in commissions which would otherwise have been paid to life insurance agents.
There is a savings in the distribution channel. The Insurer does not need bancassurance (Where banks persuade you to buy life insurance and take a commission from the Insurer).
All paperwork which the Insurer does on term life insurance policies have been shifted online and leads to a substantial saving in costs. The Insurer transfers all these savings in cost to you and the online term plan is available at a sizeable discount (50-60%) than its offline counterpart.
In an online term insurance plan you would have to fill the online proposal form yourself. You no longer have your life insurance agent to fill it for you. This is a blessing in disguise..... You can fill the online proposal form accurately which means there is a lesser chance of your family’s claim being rejected. If you are a smoker you would mention it in the online proposal form. If your life insurance agent fills your proposal form (offline mode) he might forget or deliberately not mention this detail to save your premium (You pay lesser premium if you are a non smoker). This might lead to your family’s claim being rejected.
Online term insurance plans are plain vanilla policies (Simple policies with no added flavors).You cannot get rider benefits in the online term insurance plan.
Rider benefits are additional benefits such as an accidental rider where if you (the policyholder) die in an accident, additional amounts will be paid to you over and above the sum assured. These policies also charge a higher premium for such a benefit.
You would take this plan if you are young (25-45 years) and tech savvy. This is the age when your loan liabilities are high (you have a car loan, home loan or a personal loan) and you don’t want to transfer this burden to your spouse if you are not around.
You would take a high sum assured (about 15 times your annual income + any liabilities) in your online term insurance policy.
The Insurer would compulsorily require you to undergo a medical test as you have a high sum assured. Since you are young you would be in good health and you would be easily covered.
Your main worry…The premiums for these online term insurance policies are so less…How will the Insurer get the funds to settle my family’s claims?
Online term insurance is a relatively new business and not much data is available on the claim settlement. However there is reason to be optimistic that your family’s claim will be settled.
You are young and healthy when you take an online term insurance policy and insure yourself for a high amount (sum assured). This means you have to take a medical test. Your health details are known to the Insurer and this improves your family’s claim settlement chances. Life insurance is a contract (Made in good faith) where it is your obligation to disclose all information needed in a correct and proper manner. If you lie your family’s claim is liable to be rejected.
You have to fill the online proposal form yourself (Without the help of your life insurance agent) and this means a better disclosure. You would disclose that you are a smoker or have term insurance plans with other Insurers. This means the chances are better that your family’s claim will be accepted. All Insurers would have to maintain a margin of solvency (Money set aside for daily operations and your claim settlement) and Insurers have the money to settle your family’s claims.
Claims are generally rejected if details are not filled/disclosed in your online proposal form or if fraud is proved. A thorough investigation is conducted by the Insurer if a claim is made in the first two years of taking the online term insurance policy.
Yes. You need to check the claim settlement ratio of the Insurer. Claim settlement ratio is the ratio of the claims settled (paid by the Insurer) to the claims received by the Insurer. A claim settlement ratio of over 90% means it is highly likely/probable that your family’s claim will be settled. If an online term insurance plan which is cheap matches your needs you must avail it.