Did you buy a term plan few years back? Many of you did. Aegon Religare was the first company to launch its term plan in India and from that point, lots of companies have launched their online term plans. Recently I got a comment from one of the reader who had bought his term plan from Aegon religare long back and they increased his Sum Assured by 25% because they have reduced the premiums recently
I had taken AR iterm couple of years back. today i received an email saying my sum assured is increased by 25% of original to keep it at part with the new iterm rates. This is a good experience from AR – Says Muthu Krishnan
Term Insurance premium is constantly coming down from many months and new companies entering this online term plan business are making sure they keep down the premiums due to competition. The new entrant in this field is Bharti Axa eProtect plan which has lowest premiums compared for 25-30 yrs group at the moment.
“Term life insurance premium depends on the mortality experienced by a life insurance company,” says Suresh Agrawal, executive vice-president, Kotak Mahindra Old Mutual Life Insurance. “As the mortality experience of the insurer improves over a long period of time, it is passed on to the customers in the form of lower life premium for the new customers.”
However the point we are raising today is, what about those people who had already taken term plan 2-3 yrs back? It can be online or offline doesn’t matter, the point is that they are paying a very high premium compared to a new policy which they can buy.
For instance, someone who had bought a policy with sum assured of 50 lacs before 1-2 yrs must be paying around 7,000-8,000 premium, however if they dump their old policy and take up a new policy they will get it much cheaper despite their higher age now. So the good idea would be to look back at your term plan and see how much are you paying and how much is latest premium in the market for the same company or some new company?
Important point before you change your Policy
1. Older the Policy, better it is
A very important point worth noting here is that in Life Insurance any claim which comes within 2 yr is considered as “early claim” and it’s scrutinized in detail, very detail. However a policy which is more than 2 yrs old does not come under “early claim”. So, if you have already completed 2 yrs or close to completing 2 yrs, this is one thing you will lose out when you take a new policy. However its just a point you should know, it’s not something which should stop you.
2. Look at your health changes
You need to see how your health has changed after you had taken the term plan, if you have developed any illness in between then for you the premium will increase (loading) after the medical tests. So even if the premium might show cheaper on the calculator, after you do the medical, the new premiums can actually be much higher than your old premium. So better look at that aspect.
3. Take a new plan and then close the old one
The best way of moving ahead with new policy and dumping your old one is to first apply for the new term plan and once you get it, then close the old one. Do not just close the old one and then take a new one because in case there is some issue in getting a new term plan or if you are unsatisfied in between, it will be a bad situation to be in.
This topics brings another question in mind – Should there be Life Insurance Portability in Future ? Do you think its something desired or not ?
{ 95 comments… read them below or add one }
Good article and on time, actually for me atleast.
I am going to pay premium this month for my offline ROP Aviva plan. which costs me 30 lac with 13215 for 30 yr policy. Reason for buying this one is , it was non medical , and available to NRIs. during the buying process i compared the ROP with offline cheapest one KOTAK. They were asking 18k for 50lac ( without ROP & for smoker). so i gone with AVIVA of 30 lac( they are offering max 30 in non medical requirement).
Do we have any site/place to compare current term plans.
Is there any chart/table available that max how much company can raise after medical test. it should be shown clearly that due to x,y,x problem our premium rate increased after medical.
what do you think?
Thanks
Jig
I think being an NRI , this one is a good plan for you . Its not easy for NRI’s to get a term plan anyways .. The portals will not give you premiums for NRI’s anyways . .so better enquire manually at 3-4 sites for the new premiums . And In case you are going to change the plan, better take the new one first and then dump the old one !
Manish
Hi Manish,
Thanks for such informative article.
Do you have any idea about some other term plans for NRIs.
Regards,
Nikhil Mittal
Hi Jig,
Policy Bazaar give you a fair comparison for all.
Try you hands here
http://www.policybazaar.com/life-insurance/term-insurance-india.aspx
As Manish told here , it can be huge difference in the premium, e.g. If your DOB is 1-1-1982, then few years back minimum premium was ~8000, while now for the same 30 years tenture, it is Rs. 4,522 (45% lesser).
Regards,
Vishnu
http://timir126.blogspot.com
well they are showing mainly online plans which are not ok with NRIs. second after medical the situation will depend on your check up. so i was asking about any rule of thumb to amount of increase in regular shown premium if we are smoker/drinker ..
Jig I feel your choice is nice.. Aviva plan is nice..
interesting.do have anything to offer for persons like me who recently retired and really got lost in planning for dues likely to come from the co.Thanks and regards
Kautilya vora
Kautilya
Not sure what exactly is your query ? Can you elaborate !
Hi Manish,
Yes, the information is correct that AR has upgraded my term plan also. Sum assured is increased by 25% & also they have added Terminal Illness Benefit in my term plan.
awesome
Yes, i too hava a term policy from Aegon religare for Rs. 45 lacs and they have icnreased SA to 59 lacs along with terminal illness benefit.
Yes it is true, it has happened to me too. I had iTerm policy for SA 90 Lakhs and now it has been enhanced to 1 Cr 29 Lakhs along with terminal illness rider. Kudos to AR
Thanks for confirming once again that !
Policy amount is enhanced, hope you would be happy
They are providing life coverage till max age of 75 (or) policy term up to 40 years! Earlier it was 25.
When I posted a query to Aegon, why not increase the Policy term along with life coverage, they said we will get back
Sure they will not
Prasanna
I think they did what best they can do
Also, I would suggest to have a look on Claim Settlement Ratios list on IRDA website & don’t just fancied by lower premium policies.
Having said that, I think LIC is an exception(96%) since they may be settling claims which are one/two decade or more old… Just think what SA ppl normally prefer in those days… Easy for lic to settle.
Alok
GOod point !
Hello Alok,
Where do I need to check the Claim Settlement Ration on IRDA website- http://www.irda.gov.in/Defaulthome.aspx?page=H1.
Request you to please let me know the navigation path.
Visit http://www.irda.gov.in/ADMINCMS/cms/frmGeneral_NoYearList.aspx?DF=AR&mid=11.1
Download “Annual Report 2010-11″ & hop to Page No 384-385
Thanks a lot Alok !
Nice and informative…. could you pl help me in understanding the meaning of that table in page no 384-385
Good awareness article Manish. I think people should avail the benefit of this stiff competition, seldom consumers are on the better side of the deal.
Vivek
Yes .. but they have to look at those points which I have mentioned at the end of the article . There are disadvantages too !
Agree. Let’s pray that portability is introduced in life insurance as well, which should take care of the disadvantages.
Hi Manish,
Thanks for a very good article again. You are going a great job.
Just want to add one cent in the article; you could elaborate more on that.
“If an insurance policy is terminated before three years, the tax benefits under Section 80C are reversed.”
Thanks & Regards,
Akhil
L&T Infotech
Akhil
Yes thats true for any policy which also have “investments” component in it , term plans do not come into that .
Manish
U did it again!
Manish I’s contemplating on changing my life insurance policy y’day & came across eProtect by BhartiAxa. Rs 1cr cover for me is costing just Rs 7280 including medical test costs for 10 yr premium paying. 1 thing is holding my decision.
Apart from a 50lac cover from BSLI, I’ve a term ins of 25 lac provided by my employer so I’ve asked them to give me my policy no. & other details asked by BhartiAxa. But being a Group Term Insurance scheme, I’s told tat there wont be separate policy no for me.
So do I need to declare both of my policies to BhartiAxa?
You dont need to declare the group policy . All you need to include is your seperate policies bought by you .
Manish
Thanks Manish.
Hi Manish,
Great article and very relevant for financial planning. Regarding term-plans with medical test, what is the procedure… does one go for medical at own cost or company’s cost? Also, is the premium amount decided n paid after medical test or before?
Shib,
Medical tests normally depends on company’s requirements & SA you opt for.
- If tests are required, company only bears the whole expenses.
- Premium paid includes medical tests cost & has to be paid before the tests.
Medical tests are conducted by company , you dont have to pay for it . The premiums can be increased after the medicals if required
However HDFC requires client to pay for the medical tests.
I didnt knew that .. is that true for term plans also ?
Hi Manish,
This is an informative article on the term plans. I appreciate that you could suggest ways for the people who have already been locked in higher premium plans. But you suggest to keep the original plan and take a new one. What kind of hurdles do you expect to be encountered while applying for a new plan, specifically in the context of having an old one ?
Rajesh
If you see the end of the article . Its clearly mentioned that older the policy better it is. Also taking a new plan is suggested only if you are really saving a good amount on premiums and getting extra features.
Manish,
Thanks for replying. And what about the “Life Insurance portability” that you have mentioned ? Is there something floating around to bring-in such a policy ? I think that would be one big thing the personal finance sector requires now.
Nothing like that is floating around . Its just a point that came to my mind and I wrote about it just like that !
Good article Manish. I am having Amulya Jeevan from LIC which I bought earlier when confidence in Private insurer were low, along with iProtect (now iCare) from ICICI Pru. Now almost all private insurers are offering cheaper plans, I am considering switching LIC to HDFC’s click2protect policy, so would have two term plans each for 50L. I believe if I am furnishing true information while taking policy, there’s very high chance of honoring claims otherwise your contact information is there in my IFE (In case of Financial Emergency) document.
Jagbir
Yes .. there should not be any issue if you are honest in your form
Manish,
Please also clarify the different reasons of claim rejections..
Have you gone through the soft book of term plan by manish?
Alok
There is only one reason , when some thing is hidden in the policy
Manish,
In case I decide to take a new policy do I need to declare the existing policy that I am planning to close after receiving the new one?
Why do companies ask for existing policy details anyways?
Vivek
Yes , existing policy details will have to be given .
Well,
If i have Term plan of 1 Cr which i want to close and wana go with new 1 cr policy with different insurers. How to proceed?
How the company will allow me to take 1 cr more if i have already 1 cr coverage though i am going to close but company is not aware of that.
Confusion…
Jig
If you close the old policy completely before taking the new one, then its just like you are applying for FRESH policy , then your age , your existing health , your illnesses all will come in to picture .
But if you are applying for a new one and at that time the old policy is still in force (you are planning to close it after you get the new one) , that would be violation of terms and conditions in that case . Dont do that .
Manish
So what you are suggesting right now is differ from your blog statement.
Close existing then applying new one. OR
Apply new one & then close existing one? if this is done, we have to inform them about our existing policy ( which we are going to close after new policy is activated) this is the confusion
I have exactly the same query…Please let us know what you do…
Jig
Those are 2 ways of doing it , and both have advantage and disadvantage . If you dont close the old one and apply for the new one, the advantage is that if the new one gets rejeected, you still have old one and can continue that, but disadvantage is that you might not get the high cover because you already hold a lot of insurance . So you have to decide which way you want to go ! .. I hope you got the point now .
Manish
Hi Manish
Thanks for the post. Need to add a small point. While its a wise idea to get the new policy before letting the old policy lapse, it is also very important in the proposal for new policy, to mention the details of your existing cover. In case those details are not informed/ inadvertently missed out, company has the right to reject the claim on ground of suppression of facts.
Abhinav
Abhinav
Yes , thats a valid point
Hi Manish
Thanks for the info. I want to clarify that if I take a term plan now and in future settle abroad or go out for long assignment (status change from Resident to NRI), will the policy be valid? Do I have to inform the policy provider?
Yes it will be valid. No. This information is as per my agent. So should be double checked.
thanks for updating on term plan ? but the why Life insurance corporation of india more than 70% insurance sector steak holder in india charging high premium of for the same? and what are the records of the private insurance companies like aegon about the death settalment records?
This is an excellent article from Jagoinvestor on Term Plan.
Avinash Thosar,
Regarding LIC high premium on Term plan, they have a semi monopoly kind of situation and a brand image, which private Insurance Companies have yet to establish. In spite of Regulator IRDA people feel LIC will honour all the claims while Private Insurer may Reject them.
However this is NOT TRUE. Fault lies to an extent with us the customers.
Advice to all those who apply for new on line Term plans while their old term plans are inforce, please mention all your earlier plans. Do not hide any facts regarding your health or your earlier plans or any other information asked for in the Proposal Form, so that any Insurance company does not find a reason to reject God forbid in case a claim arises.
Any comments from other Readers are Welcome.
Sudhir Goyal
any updates on the launch date of LIC online term plan…waiting eagerly to see how LIC plays the online game..
The product is ready, but the launch is getting delayed
hello manish, thanks to u as getting alot of information from ur site. my question is m having jeevan saral policy, 36000/year completed 3 years now i want to discont it and take a tem plan so that remaining amount i can invest in ppf to increase the investment. if i will b able to get full money back from lic or not? is it a good decicision?
archana.
Archana
You will not get all the money , you will get just 25-30k total , but it would be a good decision to stop the policy
Good points Manish.
Claim settlement ratios as always are also important.
What maybe of interest and and perhaps of relevance is what did you do with your term policy. Its more than likely that you got yours offline and a few years back (SBI term if I remember right?). Are you going to change yours?
I have a term plan from LIC. I was wondering about getting more insurance but after I used your recent child education planning calculator I realized I had the correct amount.
I read somewhere that as long as your annual premium is less than 2-3% of your gross annual salary there is not much issue. Even LIC scores in this regard for me.
Changing a term plan for lower premium is a needless exercise. It is akin to investors chasing after better returns without a goal in mind.
The lower rates help the under insured get additional insurance.
Pattu
Its actually very much related to how senstive to all these things . Some people raise these all questions (new term plan for low price) , so those people can refer to this post. You are going the right way ! .
Dear Manish,
I have also been provided the benefit of 25% increase in sum assured as well as inclusuion of terminal illess benefit in my -iterm policy by Aegon Religare. It is a good move on their part as I too was thinking of switching over to another term plan on account of following two aspects:
(i) Drop in premium rates of term plans
(ii) LIC’s proposal to launch online term plans
The first point has been wisely addressed by AR by passing on the benefit of lower premium rate scenario to the policy holders.
However, I feel that at this point of time, those who wish to buy a new plan or switch over to other plan should wait for the launch of LIC’s online term plan as it is already overdue for launch before deciding upon the strategy as the credibility factor of LIC still stands unmatched.
Hemant
Hemant
Nice to see that AR has passed this benefit to their existing customers ! . Didnt expect it !
Hi
The article is very informative. Most of the policy holders not aware this.
Sukumar
Good to hear that you got aware because of this !
One other issue is being over insured during the switchover. Say you have 1 crore policy from X and Y companies and 1 crore is all that you are worth.
Say you want to buy a 50 L policy from company with intent of discarding policy from Y.
If you apply to Z you need to declare X and Y policies. So according to Z you already have 1 crore. Why would they issue another 50 L policy? You could tell them about your intentions etc. but if your Y policy expires a few months away you will be over insured during that period even if Z gives the policy.
If you die within that period the claimant will have to details of X,Y and Z to each company. This may result in issues?
If the gain from switch over is only a few thousands is it even worth it? Inflation will reduced this difference in time anyway.
Pattu
Fair point .. Agree that this issue will happen which you mentioned .However a small section will fall into it as far as what I can see . Also savings of few thousands over many years can mean something for few people . Its a personal choice and decision on how you look at it . however I can see how you look at it and somewhere I feel that way too .. Dont Fix if its not broken ! . Right
Manish,
Very good points. I am eagerly waiting for LIC’s online term plan.
The new entrants will deliberately reduce the term insurance premium to grab the market. And there will always be an uncertainty in the case of settlement in the case of private players.
Does anyone is having any idea whether India’s largest player & monopolist(LIC) is not reducing the term premiums ?
Mithun
It does not work like that . LIC will be coming up with their online term plan soon
Manish,
I had been just wondering…can we update the information with the insurance company later on ?….say for example I take the new term plan from X company and mention all my existing insurance policies in them.But incase I close the existing policies after getting the new policy can I update the same with the X insurance company…….& also do that update will help after already getting the fixed premium ?
Suhas
Notifying them for any closed policy is not required and not going to help in anyway !
Dear Manish
I have sent you a friend request on linked in so I can discuss more with you about financial planning. For now me and my husband we together earn 1 lac a month and every month we pay 30,000 towards car loan and home loan.
we want to further plan our investments and i have a ppf account but will get one open for my husband. along with this we have a few jeevan anand for the 2 of us. we now want to know more ways of saving money and know more on term plan as we are paying huge loan and want to secure it.
is there a way i can discuss it with you as you seemed to be a learned person in these matters. we are a young couple and want to be smart in planning our future for ourselves and for each other.
shweta
Intimating about health complication after policy in force? This I am hearing for the first time. You need to cross check with the company again on this. I hold Kotak policy and not heard of any such requirement from them.
Anyways, I suggest you to go with HDFC and get the medical done. Dont fall into the trap of non-medical of ICICI as it will cost your family dearly in case of claim arises. There is not much difference in the claim settlement ratio between ICICI and HDFC, but I personally had bad experience dealing with ICICI.
but i am surprising and trying to find out one question? why there is so much range of premium variation in term insurance policy for different insurance companies? which one is appropriate? is it premium amount is the only factor any one should consider while buying term insurance?
Avinash
Premium difference is because of many reasons like COST , Experience with claims , Underwriting rules etc etc . you should choose a policy based on your trust , cost and features !
Please find the extract of IRDA bilangual annual report 2010-11 Page 291.Hope This will be relavent here:
ANNUAL REPORT 2010-11
20
BOX ITEM 1
CLAIMS SETTLEMENT IN LIFE INSURANCE SECTOR
In the business of insurance, the timely settlement of claims is a vital function that needs no special emphasis. The
claims settlement record of an insurer is, therefore, the touchstone of its performance. In order to ensure that the
insurer is in the position to promptly settle all its claims, it needs to do a careful evaluation of the risks that would arise
out of the underwritten contracts and price their premiums accordingly. Underwriting expertise is often what differentiates
the performance of one insurer from another; and if an insurer fails to anticipate claims correctly, it runs the risk of
erosion of capital and of solvency/liquidity issues. On the servicing/market conduct front, insurers need to develop a
robust claims processing mechanism which is speedy and policyholder-friendly. Excessive time-lags in settlement of
claims or higher percentage of repudiations speak badly of the insurer’s approach to its business and to its policyholders.
It is often said that life insurance is a contract between two unequals – the mighty institution with legal know-how and
all other resources at its command on the one hand, and the lay policyholder/claimant without much understanding of
law or necessary resources to take on the insurer, on the other. Recognising this fact, the primary laws as well as
subordinate legislations have included a number of provisions intended to protect the interests of policyholders/claimants.
These provisions, which are discussed below have gone a long way in ensuring prompt settlement of all genuine
claims:
• Section 45 of Insurance Act, 1938 stipulates that no life insurance policy can be called in question on ground of
mis-statement of facts after two years from the commencement of policy unless the insurer shows that such
statement was on material matter and that the policyholder knew at the time of making it that the statement was
false or that it suppressed facts which were material to disclose.
• Proviso 8 of the IRDA (Protection of Policyholders’ Interests) Regulations, 2002 lays down the guidelines on
claims procedure in respect of a life insurance policy as follows:
• A life insurance policy shall state the primary documents which are normally required to be submitted by a
claimant in support of a claim.
• Any queries or requirement of additional documents, to the extent possible, shall be raised at one go, and
not in a piece-meal manner, within a period of 15 days of the receipt of claim.
• A claim shall be paid or be disputed giving all the relevant reasons, within 30 days from the date of receipt
of all relevant papers and clarifications, except where an investigation is warranted in the opinion of the
insurer.
• Where an investigation is warranted, the insurer shall initiate and complete such investigation in not later
than 6 months from the time of lodging the claim.
• In case of a delay on the part of the insurer in processing a claim, the life insurer shall pay interest on the
claim amount at a rate which is 2 per cent above the prevailing bank rate.
• Redressal of Public Grievances Rules, 1998 provide for appointment of Insurance Ombudsman for redressal of
policyholders’ grievances. The powers of Ombudsman as laid out in proviso 12 of the Rules include receiving
and considering any partial or total repudiation of claims by an insurer and delay in settlement of claims.
The Authority also conducts periodic on-site inspection of insurers during which the insurer’s compliance with the cited
provisions is verified. Insurers found violating the law/regulations are liable for regulatory action. In addition, the Authority
has installed an elaborate grievance redressal mechanism, Integrated Grievance Management System (IGMS), which
enables consolidated access to grievances lodged with insurers and those lodged on the website of IRDA. All grievances,
including those which are claims-related, are captured by IGMS and tracked by the Authority for manner of disposal
and time-lags. Insurers too have internal claims review mechanisms/processes through which they try to ensure that
claims are settled promptly and that no claim is repudiated on flimsy grounds or without adequate documentary evidence.
Hi Manish,
I already have a term insurance plan from Aviva (i-life) I want more coverage so should I go for Aviva Life Shield as well?
Manish
I have one question. All new online insurance are coming with “No medicals required ” offer. Will it affect the claim settlement later? As all online insurance plans are new, no body knows the claim settlement ratio. They can reject the claim by saying you have not provided correct health information at inception. Isn’t it a good idea to buy a plan which includes medical test. I am planning to buy one from HDFC click2 protect and they do not require medicals.
I already have i-Protect from ICICI prudential with medical (this plan is no longer available).
What are your views about all this?
-Purvesh
-Purvesh
Purvesh
No medical plans generally have higher premiums , thats the reason they do factor in the health issues you might have but are not aware of, but personally i feel you should go for with medical plans only . I think it will be done if you take it for more than 50 lacs cover. I will publish an article on this issue in 1-2 days !
hi Manish:
I presently have a term cover for 4cr from ICICI Pru Life Insurance. I am planning to switch this year (the annual premium comes up in April) to a different provider and also increase my cover to 6cr. I would like to preferably buy these in the online mode. What cos / products would you recommend?
thanks
Sunshine
Sunshine
Why do you want to change the insurance company ? Some new options for you are HDFC and Bharti AXA
Manish
Manish your view on combining offline and online term plans? ex. i-life and life shield?
Tisha
You can do it , perfectly fine to do that
Combining two term plans is a good option.. Just learnt.
I am planning to buy i-Life now..
Good to hear that Ranjan .. just take actions fast !
Hi Manish,
I am 38 years old and have 5 policies comprises of life insurance and educational plans amounting the premium of Rs. 1.71 Laks per annum. Now after seriouly going through my previous investments(it seems worst now !!!), I have decided to stop or surrender most of them and want to take up new life insurance as “Term plans for sum assured of 25L+25L+75L=75L” and want to divert rest of the premium amount to MF s and planning to open PPF accounts also:
Details:
Policy Name /Start Date /Annual Premium /Sum assured
LIC New Beema Kiran /April-2002 /Rs. 2988 / 2.50L
ICICI Life Time Super /Jan-2007/Rs. 50,000 / 5.00L
ICICI Life Stage Assure /Nov-2010/Rs. 50,000 / 2.50L
Kotak Life Insurance – Smart Advantage /Nov-2009/Rs. 50,000/ 10.00L
Kotak Life Insurance – Headstart Future Protect /Oct – 2009 / Rs. 18,000 /Rs. 2.70L
All seniors are kindly requested to provide their valuable input in all respect. I am keen to know which policy to stop and which to surrender.
Thanks
Dipender
Dipender
Yes .. you are paying a lot of money yearly for junk . Better take a term plam for 2 crores (1+1) and just start investing in Mutual funds SIP + PPF . that should be the best thing . Stop these policies now
Nice post Manish.
I have iPru. Planning to buy Aviva iLife now…
Yea .. you can do that .. also another option is Bharti Axa
thanks for helping us . I and my wife both working, can my wife be proposer for my life term plan? reason for that is my 80/c limit of 1 lac is exhausted with housing loan pricipal amount and ppf. she left with 30000 to 1lac 80c limit
Yes she can do that ..
Hi Manish,
I am holding AR iTerm since couple of years now. I have taken 25L cover at 6976. Recently they have upgraded my SA to 28,69,000 and included Terminal Illness cover as indicated by few of my friends in earlier posts. If I calculate roughly it would come around 11.5% of increase compare to 25% in some posts here. Is this increase in terms of percentage is fixed or it may vary depending on the SA? My second query is recently I got my renewal update and to my surprise the premium has been increased from 6976 to 7107. I am trying to contact AR representative and get the details but just wanted to bring this in light if someone has the same experience.
Thanks.
Not sure why its coming to 11% only in your case .. check with AR , they will be able to explain this