People are becoming financially literate and now understand the need of having a term insurance plan. Online term insurance plans have become more attractive as their prices have fallen by 40-50% due to demand from consumers and rise in competition among insurance companies.
You can either buy an online term insurance policy from insurer’s website or from online comparison sites (web aggregators).
But biggest question is that on which factors your decision should be based on, whether you should go for the cheapest term insurance plan or with the insurance company having highest claim settlement ratio.
The term insurance policies are similar despite the attempts to create features such as deferment of policy proceeds (periodic payments instead of lump sum payment) or some riders that provides for additional covers on payments of additional premiums.
In recent times, almost every large insurer has a comparable claim rejection ratio. Besides, new amendment to Insurance Act, life insurance companies cannot reject any claim after three years on any grounds. And if you are making full and complete disclosures in your proposal form, insurer can’t reject even early claim. So, low claim rejection ratio as a parameter is for choosing an insurance company is no longer very relevant.
Some insurers have dropped their premiums very low but now have very tough norm for those who will be eligible for these premiums. So, the cheapest Online Term Insurance is not necessarily available for you.
In most cases, customers would actually end up paying higher than the standard premiums so the lowest published premiums are just illusory. After medical test, customers are asked to pay higher premiums for issuing policy or their proposals are rejected.
If you refuse to pay additional premiums then you have to go through the whole proposal and medical examination again and have to disclose the fact that his proposal was rejected in the past.
Rejection of proposals will further increase as insurers have become extra careful in issuing life insurance policies because of recent amendments that disallow rejection of claims on any ground after three years of policy issuance.
This problem is more acute in the critical illness policies where outright rejections are wide spread and where it is even more of a challenge to motivate the consumer to persist with the process of getting this policy.
No data is available on the proposal rejection percentages or the percentage of proposals in which a particular insurance company has proposed an increase in premium over and above the normal premium. Hence, there is a need that Insurance Regulatory and Development Authority of India (IrdaI) should collect and disseminate this kind of data so that consumers can make an objective decision on their insurance provider.
Till then, consumers can look forward for online web aggregators as they make money on actual issuance of the policy and they will work harder for a company that is actually interested in issuing policies.