Jagoinvestor

March 1, 2012

Should you repurchase a new Term Plan ?

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 Axaย 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 7,000-8,000ย 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 take a new term plan and 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 term 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 ? Did you understand when you should switch to a new term plan ?

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Jay
Jay
9 years ago

I want to purchase new term plan of HDFC Click2protect plus. I come to know that medical will not be required for me as I am 25 years old.
SHould I go with it ? I had minor operation at the age of 22 years by Ayurvedic way.

Thanks for your help in advance !!

Pat
Pat
10 years ago

Hi Manish,
Here is my dilemma – around 7 yrs back I bought LIC’s Amulya Jeevan for 30Lacs (30 yr term) after going through the. required medical tests. However later I was detected with some congenital heart conditions which is considered as high risk profile. Now I want to increase my insurance coverage so I tried to purchase additional insurance from the private guys (ICICI Pru, HDFC Ergo, Bharati AXA etc) all have denied on medical grounds. I am not sure why this didn’t happen by LIC 7 yrs back.
Anyways now I want to buy additional policy again from LIC. However I don’t want to disclose about the old policy details in the new one. I don’t want to risk the old one for the new one.
What is the risk here?
I am ready to take chances for next 2 yrs so that Sec-45 kicks in, under which they can’t call a policy to scrutinize.
Let me know your thoughts.

Thanks,
Pat

Jwalant Desai
Jwalant Desai
10 years ago

Dear Manish
I like your all your sugesstions.
Thank you for making people life & money easy .

Varun
Varun
10 years ago

Hi Manish,

Great information on term insurance ! I need your suggestion on my life insurance query. I am paying a premium of Rs.21,000 Per Annum for three different endowment type policies of LIC. The SA is around 10 lacs and I am 26 years old. I am considering of terminating these policies and going in for a term insurance (with HDFC) which will allow me to have a greater SA by paying less premium. I can invest the remaining amount elsewhere and get greater benefits. Kindly provide your views on this.

Thanks,
Varun

Varun
Varun
Reply to  Jagoinvestor
10 years ago

Great, thanks. A few more follow up questions. I have already paid some premiums for my LIC policies. Would I get a certain amount back on termination, since these are endowment type policies? Also, is HDFC a good option for term insurance for me? I am a HDFC back customer for many years and am happy with their service plus their term insurance reviews are good too. Also will an online term plan be good in my case? I would prefer to go through an agent(like most others) ๐Ÿ™‚

Varun
Varun
Reply to  Jagoinvestor
10 years ago

No reason really for going through an agent. Just the usual mentality ๐Ÿ™‚ The online thing for life insurance is relatively new hence the confusion. I guess online one would be better then? Also, how is SBI for the online term insurance?

Thanks,
Varun

Varun
Varun
Reply to  Varun
10 years ago

Also, would a 50 lakh SA be sufficient?

Varun
Varun
Reply to  Jagoinvestor
10 years ago

Got it ! Thanks !

Varun
Varun
Reply to  Varun
9 years ago

Hi Manish,

So I got a 50 lakhs online term insurance plan from HDFC earlier this year. I now feel I should get more cover. I am thinking of going with HDFC again and buy a new policy from them. What do you suggest?

Thanks,
Varun

varun_99
varun_99
Reply to  Jagoinvestor
9 years ago

Thanks Manish !! You are the man ๐Ÿ™‚

vijay
vijay
10 years ago

Hi Manish,
Thanks for the good article.
I am vijay 29 yrs. old getting 6 lakh per annum salary. In dec, 2012 I had taken 50 lakh term insurance from SBI smart shield for Rs. 12,000 ( with ADB & CI). Recently I had taken another 50 lakh term insurance from AEGON-RELIGARE online for about Rs.7,000 (with additional raiders ADB & CI). Now online we are getting a low price premiums with the same benefits. So, now I want to move on from SBI to some other company. Please suggest me a good insurance provider for about 50 lakh term policy with good benefits or should I stay with the SBI? Let me clarify.

vijay
vijay
Reply to  Jagoinvestor
10 years ago

Thank you for your kind reply Manish. As per your suggestion I had applied for Aviva. Now I have another doubt.
I have 5 lakh. Religare Care health insurance policy ( for me and my wife floater plan), which was taken recently. Now I am looking into critical illness policy. Is it critical illness policy worth to take? If it is required, tell me your suggestion about any good policy.

Raj
Raj
11 years ago

Suggestion Needed

Hi Manish,
I’ m already having equity diversified MFs in my portfolio. Do you suggest that it will be also wise for me to go for children plans from the insurance players for my childs? If yes, do you have children plans that comes in to top of mind that I can consider?

Thanks,

Rajeev
Rajeev
11 years ago

Hello Manish,

I am 35 yrs old, male, married, sole earning member.

I have an OFF-line/Regular Term plan from HDFC (SA: 1 Cr, Pol Trem: 30 Yrs, Premium: 31,000). This is the only Life insurance I have.

Checked AVIVA ilife online Term plan (SA: 1 Cr, Pol Trem: 30 Yrs, Premium: 18,000)

So, there is a 13,000 difference in annual premium.

Should I switch? What do you suggest? and why? Bit of reasoning, words of wisdom would be great ๐Ÿ™‚

Many thanks | Rajeev

Rajeev
Rajeev
Reply to  Jagoinvestor
11 years ago

Thank you Manish for the reply.

Got no health issues, but I smoke. That’s what pushes the premium up, I guess. While taking this OFF-line/Regular Term plan, I did some comparison. Premium was around 30k with most insurers for smokers.

Actually, Aviva ilife online Term plan (SA: 1 Cr, Pol Trem: 30 Yrs) @ 18,000 is for moderate smokers. For non-smokers it is lower, i.e. 13,000 approx

So, you are recommending switch and you don’t see any inherent “catch” with online policies. Am I right??

Many thanks | Rajeev

Rajeev
Rajeev
Reply to  Jagoinvestor
11 years ago

Thank you Manish. Will do some online term then ๐Ÿ™‚ Guess Aviva would be OK as an insurer; or do you recommend some other provider??

Going by my earlier policies/experience, the premium is pretty set for smokers and doesn’t tend to increase (unless, I guess, you declare some crazy smoking habit during medicals) Any which way, one has a review period of 30 days. If the premium doesn’t make sense, one can drop the policy.

Many thanks | Rajeev

Raj Yadav
Raj Yadav
Reply to  Jagoinvestor
11 years ago

Hi Manish, I have been a regular follower of your blog. Really very informative & helpful. I have booked HDFC click to protect for SA 50L last year, term 30yrs. I am thinking of taking one more term plan of 50L to cover home loan. I just went through TATA AIA iRaksha Supreme online plan. Policy term is 40yrs and premium is also competitive, Rs. 8500. Other plan which offer 40year term are from Aegon Religare. But CSR of aegon is very poor compared to TATA AIA. Should I go with TATA AIA? other option are Aviva iLife (35yrs term) and ICICI i care (30Yrs term). Please guide me which is better options in TATA/Aviva/ICICI?

Raj Yadav
Raj Yadav
Reply to  Jagoinvestor
11 years ago

Thanks for your valuable advice.

Jwalant Desai
Jwalant Desai
Reply to  Jagoinvestor
10 years ago

Dear Manish
Kindly clarify more for why not to choose TATA- AIA for 40 years term plan wrto HDFC click to protect 30 year plan.

Arjun Dasgupta
Arjun Dasgupta
Reply to  Jagoinvestor
10 years ago

Now Aviva is up for sale, what should happen to the investors? which is a better to go now?

Raj
Raj
11 years ago

Hi Manish,

I have the following LIC policies. Could you please comment on which one should I drop/stop and go for a term plan?

1) LIC Jeevan Anurag
2) LIC Komal Jeevan
3)LIC Beema Kiran
4)LIC Pension Plus
5)LIC Jeevan Bharti.
6)New Bima Gold.

All are of average 4 years old.

Thanks,
-Raj

VIKAS SRIVASTAVA
VIKAS SRIVASTAVA
11 years ago

Hi Manish,

After reviewing your article about term insurance importance, i have decided to purchase a term plan from Bharti Axa. I am 40+ and need plan for at least 20 years as by that time my younger son will be around 23 yrs. Can you please advice whether Bharti Axa is a best choice or I can go for some other company?

Vishal Jain
Vishal Jain
11 years ago

I have taken term plan after reading your articles. But I still have some traditional money back policies and ulips going on. I want your suggestion whether i should make them paid up or should i surrender them (surrender value in most cases is less then premium i have paid all the years).

Thanks.

PRAGIT KARDEKAR
PRAGIT KARDEKAR
11 years ago

Hi Manish,

How are you?
I have been reading the Jagoinvestor blog for the past 6 months & to a certain extent I can say that I have read almost every article. The articles presented by you are very nice & simple to understand. A couple of topics made me to think about my financial life & ways of enhancing it by just a new approach. All these facts motivated me to buy your book, CHANGE YOUR RELATIONSHIP WITH MONEY, hoping that it would give more details about the topics.
I read the book & took actions, which I consider most important. I loved the idea of Master Document kit mentioned there, which I was following already.

Here is a list of actions I took after reading your book.

1- Term plan from Aegon Religare
2- Term plan from Bharti AXA (facing problem with this & need help/advice from you.)
3- Medical plan from Religare
4- Looking for a Personal Accident Plan
5- EPF Transfer
6- SIP
7- PPF

Also now I have got a bit clarity on financial instruments.
But as I mentioned earlier, I need a help/advice from you regarding a term plan.
I paid for a term plan from Bharti AXA on 31st Dec-12, my medical checkups done on 5th Jan-13 & I just received an SMS from Bharti AXA that my policy has been issued on 15th Jan-13, but till now I have not received my policy documents. I checked on their website also, in my policy details, there is no information regarding dispatch, which shows that till now policy documents are not dispatched. I tried the customer care number, but it is always busy & not able to talk to any executive, requested for a call-back & mailed them 5-6 times, but no response. So I am thinking to cancel the policy because of poor service within 15-days free look period.
Please suggest what should I do to cancel the policy so that I can take it from some other company.
Regards

Rahul Misra
Rahul Misra
11 years ago

Hi Manish,

Three years back, i bought a Birla Sunlife term plan wth 50L cover for 25 yrs. I am paying annual premium of 17000.
The policy states that on completing 25 yrs , i will receive the total amount invested (approx 4 Lakh).

Kindly suggest , should i go for new policy with less premium,

DB DESAI
DB DESAI
Reply to  Jagoinvestor
11 years ago

How can I buy the book CHANGE YOUR RELATIONSHIP WITH MONEY?

Mukesh khattar
Mukesh khattar
11 years ago

Dear Manish,

I am 37 year old and going to turn 38 in next month. I want to buy term plan for myself for about 1 cr. The questions are

1 should I go in with one company or I split my amount with two companies.

2 Buying online or offline makes any difference to claim settlement because the premium is different for two.

3 I have decided Icici prudential and HDFC for the same based on their better claim settlement ratio (wider base with ICICI) despite paying high premium with ICICI. What is your unbiased choice?

4 Would it mske semse to take a [lan which goes upto 75 years with aegon religare (but they have poor claim settlement ratio.

5 I have heard companies raise their premium after getting medical done siting nonspecific reason and if you dont agree to continue , they deduct cost of medical test from premium and give you back small amount (say 5000 from premium of 25000). Is it true and how to avoid this because afer paying premium you are at their mercy.

Waiting for your reply

Thanks for your help in advance.

Mukesh

3

Jagadeesh
Jagadeesh
11 years ago

Hi Manish,
I am 25 years of age and I wish to take online Term insurance.

I dont know which one out of these two policies, AVIVA i life or KOTAK to select.
Please help me.

prateek
prateek
11 years ago

How is aegon religare, now with all companies offering with similar premiums

prateek
prateek
Reply to  Jagoinvestor
11 years ago

Thanks for the reply.
As a complete newbie I have my apprehensions with these new players lasting in our country for the period of policy(say 40 yrs), with economic policies changing every decade.
New york life I suppose left, but talking of stable players like LIC the premiums are almost double for similar sum assured. A dilemma.

NITIN C DHAKOKAR
NITIN C DHAKOKAR
11 years ago

Dear Manish,

I want to buy Term plan insurance my age is 32 am married, with 1 kid.

Which term insurance should buy ( thinking on HDFC click 2protect)
Thinking about buying 65lac

I have new york life whole life plann ( 3.50 Lac sum insurrance) & Jeevan saral ( 2.50 Lac)

Plz help me in this regard

Shani kumar
Shani kumar
11 years ago

Dear sir,
I have just take a I term plan form Aviva Rs 35 lac , Today i received a call from Hdfc for a new term plan, My annual income is Rs. 1.80 lac. I have already taken Aviva health secure , appolo Hhealth munic plan. is it better to take a new term plan of Hdfc. on call she tell me the claim settlement of hdfc is better than aviva. please sugest me. sir

Charan
Charan
11 years ago

Manish,

Thanks for the wonderful article.. I am 27yrs old and even If I go for a max period 30yrs term policy, it would lapse at 57yrs only and thereafter there would not be any cover. Do you suggest me to go for a term policy now? or should i wait for few more years to go for a term policy. I am in a confusion. Please help. Suggest me some alternatives on how to go ahead with term policy.

Thanks,
Charan

Mohamed
Mohamed
11 years ago

Hi Manish,

I wanted to go for a term plan and before deciding I wanted to get the clarification for the following
1. Currently I am a tobacco user and if tomorrow if I leave the habit will my premium come down?
2. I heard from my friend, that we can extend the policy term if we are surviving after the term period. Is that so? If yes, which insurance company provides such feature?
3. What should we ask with the company before taking the term policy?

Thanks
Mohamed Ashikh

Raj Shah
Raj Shah
11 years ago

I dont remember wether I have given details of old policies before taking 50lac bsli. How can I find it. It was purchased via agent. Will the company accept those details now.

Test
Test
Reply to  Jagoinvestor
11 years ago

No. They will not accept and should not accept.
The Legal Contract is in force and Utmost faith should be observed while filling the proposal form.