Have you ever wondered why LIC is not offering Online Term Insurance at lower premiums. Though the experts say that LIC’s high premium is because of High Mortality rate. In my opinion, the real reason is that LIC would not like to offer low premium online term insurance else it will outrage its huge sales force / agents. The premium of LIC term insurance plan is 3-4 times of online term insurance policy like Max Life Online Term Plan, HDFC Life Click2Protect etc. LIC is still following the Mortality table of early 90’s to calculate premium for term insurance. Contrary to that in last 15-20 years due to better health care facilities, Mortality rate has improved drastically. Another reason for high LIC premium is high commission structure for its sales force / agents.
Now you must be wondering why the premium of Online Term Insurance is low compared to offline term insurance plans. Answer is very simple, the cost of providing online term insurance plan is fraction of offline term insurance plan. Online term insurance is bought directly from insurance company without intermediary. There is no sale force cost, sales commission, employee salary, office cost etc. I would like to quote example of my recent online purchase, i bought a handset from leading e-commerce portal at discount of 25% compared to retail price at company showroom. Product is exactly the same with all the accessories & freebies along with manufacturer warranty. I will get the same service as any other customer who will buy from showroom. I got 25% discount simply because the company passed its cost of selling through retail as discount / incentive to buy online. Otherwise company would have given 25% as commission to Retailer and Distributor for retail sale. Same is the case with Online term insurance plan.
Following are some of the gross misconceptions about Online Term Insurance
(a) You will not get service from insurance provider for online Term Insurance Plan
(b) Due to Low premium, online Term Insurance Plans are inferior compared to offline term insurance plans
(c) In the need of hour, claim against online term insurance will be rejected by the insurance provider
(d) Premium will be increased at later stage
Trust me all insurance companies are governed by IRDA and none of the above misconceptions are true. If you have provided correct information at the time of buying online term insurance plan than no need to worry at all. Online term insurance is exactly the same product as offline term insurance plan. There is no laxity in customer service from insurance provider. Insurance company is simply providing benefit of low cost directly to customer and charge low premium for online products. All these misconceptions are spread by agents, who are now fearing loss of business because of sky rocketing popularity of online term insurance plans. Another advantage of online plan is that there is no mis-selling. In offline plan, the customers application form is normally filled by agent and they declare wrong information to get the business. In case of online term insurance plan, complete information is available to the customer thus 100% transparency.
Recently Max Life has launched innovative “Monthly income term plan” & other plans to cater the need of customers. The basic objective of term insurance plan is that in case of any unfortunate event, the family of dependent should maintain existing lifestyle. For this it is necessary to get regular income source besides lump sum amount. In pure term insurance plan lump sum amount is paid immediately but what about lump sum payment + monthly income similar to pension plan. In laymen terms, such plans are taking advantage of both term insurance and pension plan. Insurance company pay lump sum amount (term insurance) & also pay fixed monthly income to the nominee (pension plan) for specific period normally 10 years.
Now next big question coming to your mind will be that since average inflation is 8%-9% even if dependents get monthly income, the real monthly income will be diminishing in nature. Insurance companies are smart enough to launch product with average 5%-10% increase in monthly income every year. It will take care of inflation and provide inflation adjusted monthly income to the dependent.
Lot of innovative term insurance products are available in market and customer can select the term insurance plan according to his / her needs and requirements. To summarize, Term Insurance policy is must for every earning member especially if there are non-earning dependents. You can save your hard earned money by buying online term insurance plan. The amount saved can be used to buy Health Insurance which is another must have insurance product due to expensive health care system in India.
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