Buying any financial product needs to be for a clear goal. If buying life insurance is the need, one should ensure it provides the financial well being to the dependents once the bread-earner of the family is no more. And, this is best met through a pure term insurance plan, which is a low-high cover plan. Term plans basically act as an income replacement tool hence keep a life cover of at least ten times of your annual take-home pay. Irrespective of your age, if you have financial dependents, make sure you have a term plan.
One may buy term plans offline from the insurance agents of the life insurance companies as well buy online from the insurer’s website or from policy Insurance Web Aggregators. Even though term plans are plain vanilla life cover plans that pay the sum assured to the nominees if the death of the policyholder happens within the policy term, insurers have add-ons and riders to offer making them a bit cumbersome to choose the right one.
Here’s an email interview with Sanjay Tiwari, Director-Product Management & Customer Services, Exide Life Insurance, who tells us the about the increasing acceptance of the term plans by the population, important watch outs while buying these plans and about the concerns during the claim process amongst others.
- Premium share of term insurance is 5-10 per cent which a decade back could have been as low as 1-2 per cent
- Life cover should be commensurate with age and income
- Understand your requirements from term insurance to help you achieve your goals
- Take the intended nominee into confidence about all the disclosures made in the proposal form
- If you are seeking a comprehensive critical illness coverage, it would not be advisable to add it as a rider.
Are term insurance plans gaining popularity? Do you have any industry data that can establish that more people are buying term plans or high sum assured plans are being preferred?
There is a general uptick in term insurance demand from consumers which is more pronounced in urban areas than in non-urban areas. One of the reasons that life insurers have increased their focus on Term Insurance due is due to a seriously high level of mortality protection gap compared to other markets. These days some life insurers may boast of a premium share of term insurance of 5-10% which a decade back could have been as low as 1-2%.
To put things in perspective, growth in term insurance business albeit from the low historical base is a welcome change as this is a product with a clear product proposition for customers and does not need to be propped up on tax incentives either.
What are the important watch outs while buying term insurance plans online and offline?
As in the case, while purchasing any insurance, customers must compare all term plans available in the market and try to identify the one that is most relevant to their requirements. Providing financial security to the dependents requires careful evaluation of the working years as well as of the life goals planned for the family.
Hence, picking a policy with the longest coverage term or choosing the highest coverage product may not be the best approach. Life cover should be commensurate with age and income and understanding your requirements from term insurance will go a long way in helping you reach your goals. Claim settlement ratio of any insurer should also be taken into consideration while purchasing any policy.
It is advisable to take the help of an insurance agent to get the complete picture of the various offers and plans in the market, which may not be feasible to choose and decide independently.
Once the policy to be purchased has been shortlisted, responses to questions in the proposal form require utmost diligence on the part of the life to be assured. It is also prudent to take the intended beneficiary/nominee into confidence about all the disclosures made in the proposal form, apart from providing them access to all documents required in the event of the claim.
In the case of online purchase, you must always be alert and only use the official website of the insurer/IRDA certified online portals to avoid being a victim of phishing or fraud.
How are insurers gearing up for product customization? Could you share some examples?
While term insurance is currently commoditized since the Indian market is mainly price driven, we do see a potential for customization. With deeper insurance penetration, term insurance will evolve to offer more customized solutions.
There are term insurance plans that cover death as well as critical illness, disabilities etc. Should they be preferred or should one prefer plain vanilla term plans? Whom do they suit?
Standalone Term plans only offer death benefits. However, to make it more comprehensive, Insurers offer bundled propositions which add rider coverage including critical illness, disability and even accidental death. For these riders, customers have to pay additional to the premium. Combining the purchase of riders such as critical illness along with term will always be advisable as it enhances the protection provided at an affordable cost. However, if you are seeking a comprehensive critical illness coverage, it would not be advisable to combine these purchases.
What, according to you could be the factors that can lead to repudiation of a life insurance claim?
Since Insurance is solicited on ‘Uberrimae Fidei’, that is, in ‘Good faith’ basis, it is always recommended to disclose all material facts asked in the proposal form. If all details related to your health and lifestyle as well as the family history that is known to you at the time of purchasing the policy are disclosed truthfully to the insurer, repudiation will be unlikely. Additionally, all relevant documents must be provided to the insurer at the time of claim.