There are tonnes of insurance policies available in the market today. But the question is: which one to go for? However, this question should not pop up in your mind if you have been reading news lately.
Read this headline carefully: "Investors have lost Rs. 1.5 lakh crore due to mis-sold insurance policies".
The reason why the above headline needs to be read carefully is not to notice that there has been mis-selling from the insurance agents, but the sheer number - 1.5 lakh crore worth of our money has been wasted in dud insurance policies.
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 and offline. The online form is increasingly becoming popular because of several 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 that suits you best.
Cost is a major factor while going for term insurance. A lot of online term plans are cheaper by 50-70 per cent (or even more) compared to their offline counterparts. Now, this is mainly due to these two factors:
- There is no intermediary involved in the process. You deal directly with the company and hence, the company's costs are less as compared to the offline mode.
- Companies often believe that the mortality risk is lesser in case of online consumers than offline. As a result, they are ready to offer a lower premium in the online mode.
Industry experts believe that such low premiums can bring about a price war in the insurance sector similar to the one in the 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 ago and now you get it for Rs.15,000 for the same assured sum and tenure.
There have been many cases where consumers complained they had bought online term insurance plans in India at higher prices just a few years back. The answer is pretty simple: stop paying premium for the existing policy and opt for a cheaper one; but do make sure that other factors are satisfied too.
The 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 a policy online since here you do not have the privilege of an agent helping you. This is also a blessing in disguise as in the 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 customers' information while filling the form - either intentionally or by mistake. This could prove costly during claim settlement.
3. Claims settlement
If there is a concern in the consumer's mind while buying term plan online, it is this. Also, this concern is very much 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.
However, if you have disclosed all your information rightly, there is no reason for you to be worried about the settlement of your claim. Insurance regulator IRDA has imposed stringent rules on insurers, with one of them being that they need to reject a claim (if any) only within 2 years since the policy was purchased. In case your claims are rejected even after proper disclosure of all necessary information, you can approach an insurance ombudsman for justice.
4. Sum assured
The average sum assured tends to be higher in the online mode, because of the lower costs involved as stated earlier. It can also be due to marketing skills of insurance companies. It is quite common to see an ad similar to this: '1 crore term insurance for just Rs.500 a month or Rs.17 a day.' More often than not, you would be tempted to purchase a Rs 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 Rs 50 lakhs or so.
Based on the above factors, the online mode clearly stands out. It is recommended, however, to calculate the amount of insurance required before purchasing a policy. All the 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.
InvestmentYogi.com is a leading personal finance portal.
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