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.
1. Cost
1. Cost
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.
2.
Flexibility
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.
Conclusion
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.
Disclaimer: All information in this article has
been provided by InvestmentYogi.com and NDTV Profit is not responsible for the
accuracy and completeness of the same.
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