Jagoinvestor
December 5, 2011
The reason why premiums of Online Term Insurance Plan are cheap !
So let’s just come to the point directly! Why the hell on this earth are these Online Term Insurance Plan premiums so cheap? Sometimes even 25-30% of what an offline term insurance plan costs.
So now, think hard! What are the factors which make Online Term Insurance Plan premiums so cheap?
You will hear most of the agents, planners and even media personalities tell you that its lower because the agent commissionis saved and other administrative costs are not present in online term plans, but that’s not the biggest reason because if agents commission is just 25% of the premiums in 1st year and there after it’s in single digits for rest of the term.
So if agents commission’s absence was the reason for lower premiums than it should be just 10-15% lower than offline term plans.
Current Online Term Insurance Plan in the market
At present, there are a total of 10 Life Insurance companies who are providing online term insurance plans and their premiums differ from each other. The cheapest premium seems to be from Aviva iLife for most of the categories.
For example for a 30 yrs old male, term insurance for 1 crore for a 30 yrs term would cost only Rs 8200.
- Aviva iLife term insurance
- ICICI iCare term insurance
- Kotak e-preferred Term Plan
- Aegon Religare iTerm
- Metlife met protect
- Future Generali Smartlife
- HDFC Click 2 Protect
- IndiaFirst anytime
- DLF Pramerica – UProtect
- Edelweiss Tokia – Life Protection
The real reason why online term insurance plan premiums are so cheap is that the segment which buys online is perceived to be less risky! It’s about the target market category. A person who is net-savvy is perceived to be less risky than a person who is not net-savvy and then it’s assumed that he will have access to better health care a better lifestyle and more chances of outliving his non-net-savvy counterpart.
So a govt employee from Jaunpur buying a term plan directly is seen differently than an IT professional from Bangalore taking an online term plan.
So on average, a person from a big city like Mumbai, Bangalore, Pune, Hyderabad and other big cities having an ability and access to buy online has a different profile, then a person who belongs to a tier-4 and tier-5 city who is not net-savvy!
Both have different risk profiles, different mortality rates and hence premiums vary a lot.
Commissions and Admin costs?
Not to forget the agents’ commissions and administrative costs which are saved when an online term plan is issued. Those also help in saving the cost to some extent. As each and every company has its own claim record, their own underwriting rules (rules to decide the premium) and depending on how aggressively they want business :), the online term plans premiums can vary a lot across insurers.
You should check this article from money life on the Term plan and their premiums pricing. So I hope you must have got a clear understanding of why Online Term Insurance plans premium is so cheap compared to other Offline Term plans.
Hi Manish,
Good article and great help.
One quick question. If an applicant is non-smoker and non-alcoholic while taking and becomes alcoholic after 8-10 years taking policy, will this can be ground for rejection of claim.
Regards,
Mark
No it cant be . Infact now IRDA has already said that a insurance policy which is 3 yrs old cant be rejected for any reason – http://jagoinvestor.dev.diginnovators.site/2015/12/no-claim-rejection-in-life-insurance-policy-after-3-yrs.html
Dear Manish,
May I ask; regarding the question of being a “smoker/alcoholic” during insurance application and if I used to smoke in college but no more, would I still be considered a “smoker” by an insurance company? I am a very infrequent and casual drinker, so would I be considered an “alcoholic” from an insurance companies perspective?
Also vice versa, someone can be a non smoker/non alcoholic upon application and in future could become one, so would that be considered as breach of trust/hiding of facts by an insurance company, in turn getting the claim rejected?
Yes, you should mention your self as Smoker and Alcoholic. See what exactly have they asked.
Thank you very much Manish. Appreciate.
Glad to know that Binit ..
I understood from LIC officer that there is a clause of investigation if a policyholder dies within 3 years after buying the policy. Here the relative of policy holder have to prove their innocence. But after a period of 3 years claim settlement is relatively easy.
But
in case of online life insurance policies the clause of investigation is active throughout the entire period of policy. That is even if a policy holder dies after 25 years of buying the policy the entire health history and related things will be investigated before the claim settlement.
All know that this investigation is to find any lame excuse to deny the claim.
Hey Ruturaj
I think somoene has misguided you. It does not work that way !
Manish
Hi Manish,
As mentioned, that one of the reason for the online policies to be cheaper is that — a person from a big city having an ability and access to buy online has a different profile , than a person who belongs to a tier-4 and tier-5 city who is not net-savvy ! Both have different risk profiles, different mortality rates and hence premiums vary a lot.
Also in one of your other article, I came to know, that, one has to make sure to reveal each and every thing accurately while purchasing an Insurance policy, easing off the claim if arises. And, if in the details provided, something found to be in-accurate, then, there are chances of the claim getting rejected by the companies.
Please, consider a case, where a person who is working as a Software Engineer, having good salary living in a big city after revealing each and every thing accurately, purchased a term insurance policy.
After few years of regular payment of premiums, if the same person moved to his native which is a small town, to look after their family business.
If a claim arises for such a policy, can you please explain the chances of the claim getting approved/rejected, if the policy was
1. purchased Online
2. purchased Offline
Or
1. taken from Life Insurance Corporation of India
2. taken from a private company.
Thanks..
Regards,
Pavan Malekar
The claim will be paid in any case if at the buying the policy all the details where provided correctly. What happens later is not considered
Hi Manish,
I have gone through many of your articles and thanks for the informative articles.
I should not forgot to thank the participants also who bring more information into these articles.
Manish, I have a query, it would be helpful, if u can reply..
I have checked, HDFC Life Click-2-Protect Plus..
The online premium for a person aged 35 yrs (Non-Smoker, Non-Alcoholic) for a sum assured of 1 crore for a term of 39 years is Rs.16,865/- (Including Taxes).
When I visited the branch of HDFC Life, I got the quotation for the same and the premium for it is Rs.17,857/- (Including Taxes).
Isn’t the policy taken from the branch is considered to be offline..?
The difference between them is Rs.992/- and in percentage it is around 6% higher than the online one.
1. My query is whether there are two categories in offline again..?
one policy taken through direct branch itself and the other policy taken though an Agent..?
Thanks..
Pavan Malekar
Paven
Its not OFFLINE or ONLINE difference, but with agent code and without agent code. The 6% difference is not much, but if you have an agent with you, they might offer you something unique .
For example , even we are registered with HDFC and we give our clients HDFC click2protect, and we offer Claim settlement assistance to their families later in life if required. So if you are planning to take it without agent help, then go with online option (through website), but if you feel you need a detailed help in filling up form, claim assistance service for your family later in life, you can then buy with agent option , which would mean 5-6% extra premium which I feel is not a big difference.
So if you need it, you can even tell us or fill up this form http://www.jagoinvestor.com/services/life-insurance#fill-form
Manish
Manish,
Thanks for the prompt reply..
I am currently looking for online term insurance for my husband (age 35, non-smoker).
I was comparing HDFC`s Click 2 Protect Plus and ICICI Pru`s iCare II as these two are given me Accidental riders support. However, the premium for 1 Cr for 25 years looks quite different. For HDFC, it is 12+K and for ICICI Pru it is 22+K.
Wondering what are the reason behind almost 10K difference between these 2 policies? Any idea.
They have different ways of evaluating the risk ..
Hi Manish,
Could you please explain in more details ?
Their underwriting procedures are different . Underwriting means the way they decide their premiums ..
Hi Manish,
Thanks a lot for this wonderful blog and prompt discussion.
I am 31 year old( Non-alcholic, non-smoker) and planning for my 1st Term Plan of 1cr, on which I have couple of questions, some of them are partly answered above here and there, and would appreciate if you help me take a decision
1) If I go for 50L – 50L plan with two companies and incase of any mis-happening in future. How much is it possible that if one of companies reject the claim and the second company will follow the same and can reject the claim?
2) How medical check-up is done in case of online term plans?
3) Considering an investment to save future of dependents, I do not focus much on premium (if there is not much difference), Planning HDFC Click2 Protect for 50L and which is second one I can go for?
Or Shall I go for single 1cr plan with HDFC?
4) Is it beneficial to go ADB rider fo 10L paying premium of Rs.1000 extra every year.
I know asked many questions, but would appreciate your response on this.
1. There is no relation between two companies. They both will take their own decisions . Same for payment of claim and rejection of claim
2. Online term plan means the payment of premium will happen online and the form will be filled online , thats all . Once you pay the premium, you will get a mail for confirmation of premium payment and then medicals are arranged , they will give you a call and confirm for dates time etc ..
3. Go for single plan for 1 cr . Splitting of policies was suggested long back when 50 lacs was enough and premium were high .. ‘
4. Its about choice, critical illness gives you some extra benefit at additional cost, only you can decide if you need it or not .
Thanks for the superb quick reply.
Question on 3) Splitting of policies was also suggested considering that one of the policy can be closed. Does not it hold good in today’s world and upcoming times?
– Also, been through your link to compare settlement ratio and solvency ratio (thanks for it) . Can you still help me make up my mind whose online option is better in terms of buying and further on followups after the premium is paid onnline – ICICI Pru or HDFC?
Hi Ashutosh
Just that in last 4-5 yrs , suddenly money has become so much important that 1 crore is something which for most of the people will always remain “required” .. I personally think that either you will close the whole policy or none ..
So now you take your pick, you can still take 2 policies of 50 lacs and then close one later, but think hard , so you really see that happening ?\
In between ICICI and HDFC , I cant say if one is better than other, but for most of the people i recommend HDFC ..
Manish
Dear Ashutosh,
Here are a few points to help you make an informed decision:
1. ICICI Prudential Life Insurance has one of the best claims settlement ratio in the industry at 96.29%*.
2. Plus we are also one of the fastest in claim settlement and clear more than 90%* claims within a month.
* As per IRDA’s Annual Report for FY12-13.
To know more about our online term plan visit: http://bit.ly/17uqPjV
Regards,
http://www.iciciprulife.com
Yes now a days if you are taking a 1 crore policy or less, I would suggest go for just 1 policy. also i would rate HDFC and ICICI pru equal .. go for any .
Hi Manish,
Recently I came across your website.Thanks a lot for the wonderful articles.
I’m 38 years male. Planning to take 60 lakhs to 1cr term online plan. please suggest me a online term plan and should I divide that between any 2 insurance companies. and should i need to choose any riders. Waiting for your reply. Thanks in advance
Hi Manish
What do you think of Tata AIA iRaksha Supereme plan. It is a pure term insurance plan with 40 years term and offers cover of Rs 1 Crore for approx Rs 9500 ( 30 year old, male) compared to other options in market
I like the 40 year coverage which apart from no-one else offers currently
Regards
Roopesh
Go ahead in that case !
hello manish
thank you for a wonderful and informative forum
have one doubt
how is hdfc from claim settlement point of view and term plan point of view
would you suggest going for hdfc for term plan
there are two term plans by hdfc; click to protect and hdfc life assurance but the premium of the second one is almost double than first for the same sum assured, why is that so
thanx in advance
You should check this article which will clear your doubt – http://jagoinvestor.dev.diginnovators.site/2013/05/how-insurance-companies-work-and-the-business-model-behind.html
Hello Manish,
I am not sure, if you will be responsing to this message as this article is quite old.
I am 30 years old and plan to purchase a term plan for 1cr. SA. Do you advise Aviva? Or should i look for some other, kindly advice.
Thank You.
Regards,
Ashish
Aviva is good option , I would say go for it !
Thank You, i will register online right away 🙂
Dear Manish
Thanks for the article.It was quite informative.
I am planning to purchase a online term plan & had some queries regarding same.
1- What if my policy provider closes business or goes bankrupt after few of purchasing policy? Will it be transferred?
2-Will premiums be very High if I change my policy later years & opt for some other company’s policy?
Thanks
Anand
1. IRDA takes care of that
2. Yes
Thanks!
Dear Manish,
I have brought a term plan(50L) from HDFC from market two years back. The Premium which I am paying is Rs 11500/-
Now I can see that the online policy of same HDFC is with 50L cover is having premium of Rs 6000/-
what should i do?
1. Buy a new online policy and cancel the old one
2. Or Continue with the existing policy (only if there are some benefits)
3. can i convert the old policy to online policy and reduce the premium
Regards,
Pranav C Lunavat
Here is your answer – http://jagoinvestor.dev.diginnovators.site/2012/03/switch-new-term-plan.html
Hello Manish,
i have taken a HDFC Life term plan for 50L 2 year back with premium of 11500/- form market
now i can see online term policy of HDFC for same amount to be 8500/-
so is it advisable that i discontinue the old policy and take new policy?
or can i transfer the old policy to the new one?
thanks & regards,
Pranav
Hi,
Your article is nice and helpful…
I m 27 year old, want to buy online insurance policy, want cover upto Rs 1 to 2 lacs, which is the best term plan with good benefits and low cost? can u please suggest me some plans…
Kiran
Are you sure you want to take a term plan for 1 lac cover ? Is that sufficient . I hope you are clear what is meaning of term plan ?
Hi Manish,
Great article once again. It was very informative. I believe an online term plan is a great way to have yourself insured as it gives you the complete control of your policy apart from being cheaper than a offline term plan. I, however had a very bad experience with Aviva iLife. I have a medical condition and had mentioned it in the medical tests which I had been asked to undergo. The way the whole process was handled, left a lot to be desired in terms of service and customer management. Eventually, my policy was declined but it took them around 70 days to take that call after the proposal was filled. I would like to know your views about whether a person who has some medical issues or a higher probability of a revision in premium should go for an online plan because most of the times you deal with customer service representatives who rarely have any detailed knowledge or expertise to handle issues which may arise during such a proposal?
Sagar
Yes you should go with online policies only , there are many cases where things were smoother, your case is rare !
I bought an insurance policy online from Aviva i-life a few months back. I’m not net savvy and I found the process very easy. There is an online chat support which assists you if you have any question and you can get the entire process done in less than an hour. Aviva’s website is really user friendly. Can’t say about others though.
HI MANISH,
i am feroz from chennai
i try to online term plan cheap best aegon,axa,hdfc
but consumer complaint very cteap company bhrat axa,hdfc online trem plan’
display
iam not best online term plan with out medical test 50 lakhs
i have 3 yrs back 75 lakhs all life insurance term plan i do no
i try to online term plan
more question after death 100% clams ?????
which best plan ?????
You can go for Bharti Axa
Hi Manish,
I have couple of queries.
Why are women less insured compared to men?
Whether housewife can be Term insured with no annual income ? Because, Bharti AXA Term insurance Sum Assured is relative to individual annual income.
With Govt. of India allowing 49% FDI in insurance, can we expect premiums to go down still and hence wait for foreign players to come before taking a term plan?
But in the meantime, which do you think is the cheapest online term insurance in 2012 ?
Will the IRDA come to help if insurance company defaults on the maturity amount for a Term plan taken online ?
Tx
Roopa
Roopa
Wife can take term insurance if she wants to , but the logic is that she needs to have some one as financial dependent. The cheapest right now are Bharti Axa, HDFC and Aviva
I enquired Bharti Axa, HDFC, and Aviva, and the following I found :
* Only working people can obtain term insurance.
* Only people residing in few specific cities can obtain term insurance.
* Bharti Axa — Sum assured is proportionate to his/her annual income.
* Aviva — Either 3 months salary slip or latest income tax returns/Form 16 is a must. Neither of the 2, then no term insurance.
* Aviva — Housewife cannot get term insurance because she is not working !
I dont think its the case with Aviva . I recently took a plan from them and it was not asked by me
From: “[email protected]”
Date: Fri, 7 Sep 2012 16:43:07 +0530
Subject: RE:’AvivaIndia=004-455-349′ term insurance
Dear Mrs. Kulkarni,
Thank you for choosing Aviva for your Insurance needs.
We wish to inform you that as per product feature, i-life term insurance is not available for house wife.
We look forward to resolving your query at the earliest.Thank you for being a valued customer.
Warm Regards,
Lalit Singh Bisht
Team Aviva
I was talking about hte salary slip part. For housewives, it might not be there.
But housewife does not have any financial dependent on her . Why would she need a term plan ?
Manish i found out that women can not have term insurance unless they are earning money as the company ask for salary proof to pay the premium. Moreover they have another logic what if anyone who is supporting them financially is not there anymore. Hope i make sense here as i was looking for one for myself and got turned down by private company but not from LIC, only God knows why? I guess agent wanted his commission, am i right?
The simple reason is that no body is financially dependend on you . because you are not earning money , A life insurance is generally bought by someone who is bring home money and others are dependent on that . I hope you got this view point . Dont you think it makes sense ?
In that case, women who earn money but no one in the family is dependent on her and their husband earn better living, can not have term insurance?? Please educate me on this point of view.
Thanks in advance!
The person is eligible to take, because it might happen that a perosn might loose the job in future, so it will be on the person if he wants it or not .
Dear Manish,
i had an aviva online plan since last year for 50L premium being 5281 .
now i wish to take another 50L cover.Avia charges are now 5582 ( increase in service tax.)
so eventually i end up paying approx. 10800 for 1cr total coverage via 2 policies from aviva of 50l each.
if i take a 1cr fresh policy it would be approx.10200.
my question is that will it be advisable to take one policy of 1cr and discontinue my year old 50l policy or continue year old policy and add one more 50l policy
OR continue 50l year old policy from aviva and add another 50L policy from bharti axa @ 5382 ( to split 1cr across two companies)???????????????
kindly pls advice
Better take a new policy of 50 lacs, that way you have 2 policies , which you can stop anytime !
sir,
thanks for ur prompt reply but dilema is paying 900 more for same is it adviceable across 25 yrs for that comfort when ultimalely i can get same 1cr coverage and save 900 extra premium.
Associated query is how good is bharti axa…
In that case go for the cheapest one , bharti Axa only