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.
Costs
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).
Flexibility
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.
Claims 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.
Sum Assured
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.
Final Word
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.
About the Author: Manoj Harchandani is a certified TRP (Tax Return Preparer),
authorized by Income Tax Department, Government of India. He is a tax
planner and investment adviser. If you need ITR filing assistance, tax
advice, tax saving tips, short term/ long term investment advice, please
write him at manojh.trp@gmail.com
0 comments:
Post a Comment