People have started realising the need of life insurance and have now started taking life insurance plans to secure the family in case of unfortunate event. There is increase in the awareness because of the 23 life insurance cos. are in the market and try every possible thing to increase their market share. This has also resulted in accepting term plans for life cover. Term plan of 50 lacs and above are now common and people are ready to spend some part of their income in this plans even there is no maturity value in the plan. People especially young generation is not treating life insurance spending as an expense. While finalizing individual financial plan we always look first to wealth protection and than go to wealth creation. One cannot avoid need of life insurance in today’s life, especially at the time when we are moving from joint family to nuclear family.
Term insurance is the oldest form of insurance and is the least expensive plan to purchase the death benefit. It is a no return plan just like your mediclaim or car insurance cover. If claim comes with in the insured period, the nominee will get the full sum assured or otherwise there is no maturity value of the plan. Term Insurance provides coverage for specific terms say 10,15,20, 25 & 30 years. Term plans also continues till 75 years of age that also differs from Co. to Co. Term insurance is the simple type of life insurance and easiest to understand. You need not have to calculate the charges and returns in this plan, as you know from the day one that premium paid by you is not going to come back. Term plans are also available with return of premium in which you get all premium paid back if you survive till the end of the term. Premium in this plan is too high and one should ignore this. Single premium term plan is also not a good idea to buy.
Now Private players have gone one step further and are now offering online term plans. The major difference between regular term plans offered through agency channel and online plan is that online term plans are available at 40 to 50% less premium compared to regular term plans. As there is no maturity value in term plans, the effective cost becomes major criteria while finalising insurance plan. Regular term plans are loaded with marketing and office expenses. Where as all these expenses are saved in online term plan.
Agents are also paid 35% of commission in 1st year and 5% thereafter in regular term plans. Online term plan has no commission as plan is directly bought from Co. through its web site.
Experts also say that beside cost structure, mortality experience in these plans is also likely to be good as the plan is targeted to the well-educated people, who are net savvy. Mostly the targeted class shall be more informed and shall be giving true and correct details of their family and health history. This segment is also believed to afford to go to best hospital when they are sick. All these facts leads to conclusion that claim ratio will also be reasonable & thus make online term plans most competitive. These online term plans are offered in selected cities at present and one has to check before applying.
Eight private life insurance cos. have already launched online term plans, they are Aegon Raligare, Aviva Life, Bajaj Allianz, Future Generali, ICICI Pru Life, India First Life, Kotak Life & Metlife Insurance. Surprisingly LIC has also recently announced that it will soon launch online term plan. This will increase the competition in the market and will also force all others market players, who have not introduced online term plans, to launch it soon. This definitely will help the society as a whole. Before finalizing term plan, one should first calculate his/her life insurance need. It is always advisable to take term plan till you attain age of retirement. Once you stop earning, there is no need of life insurance. One should also check claim ratios before buying term plan and also required to go through exclusions in the plan. One should apply need-based theory instead of going for human life value while calculating exact sum assured required. The advice of financial planner will help a lot in this.
