Offline Vs Online Term Insurance Plan – Which is better option?
One of the primary step in financial planning is taking life insurance plan. Among life insurance, Term Insurance Plan is the best way to secure your family life which comes with low premiums and high risk coverage. You might be aware that there are two modes of buying term insurance i.e. offline and online term insurance plan. I am seeing several discussions in various investor forums on offline vs online term insurance plan. In this article, I would detail about offline vs online term insurance plan and which one should you opt for.
What is a Term insurance plan in India?
If you are aware of it, you can skip this section.
- Term insurance plans are designed for risk coverage only. In case of death, the sum assured is paid to the nominee. Zero maturity amount. Tax benefits u/s 80C for the premiums paid. Premium depends on age, the sum assured, life style (smoker/non-smoker) and any premium discounts for high sum assured etc.
- There are two modes to buy term insurance plan in India. Offline mode and online mode. Online mode of term insurance has become popular due to several positive factors.
Offline Vs Online Term Insurance Plan – Which is better option?
Let see some of the major influential factors to buy from these two modes of term insurance plans.
1) Cost of Term Insurance Plan
Online term insurance plans are cheaper by 30% to 50% compared to offline term insurance plans. Since an individual directly visits life insurance company website online and buys term insurance plans, there are no agent costs / intermediary costs, hence they come with less premiums. On the other hand, for offline term insurance plans, these are sold by agents. Commission to be paid to agents / intermediaries, hence offline term insurance plan comes with high premiums. Since mortaility risk (unknown risks or hidden risks) are almost zero as they are known upfront while buying term plan through website, online term insurance plans comes with lesser premiums.
I brought LIC offine term insurance plan few years back. Same plan with LIC now available at Rs 10,000 yearly premium with similar risk coverage. However last year I took ICICI Pru Term Insurance plan online which costed me Rs 14,000 per annum for Rs 50 Lakhs. What I am saying here is an offline plan comes with high costs, online plans come with less premiums.
2) Disclosure of facts
In online plans, individual need to fill all relevant details. He/She knows the facts. Hence online plan comes with complete disclosure of facts and term plan is given. On the other hand, in offline plans, individuals could be negligent and depend on agents to fill the form. Any non disclosure of facts by agents in the policy could lead to rejection of claim at later point of time. New IRDA guidelines indicate that after 2 years of policy, no insurance company can reject claim indicating non disclosure of facts. However, risk is still there.
I have Asthma. when I approached LIC for taking life insurance last year, I have been indicated by agent that I should not disclose this, else term insurance plan would be rejected. I have approached ICICI Term Insurance Plan through their website for online plan and disclosed this in policy offer document. My policy was approved and ICICI Term insurance policy annexure document clearly indicates that I have Asthma. Why I should hide something from insurance company?
3) High sum assured at low costs
Online term insurance plan offers a high sum assured as it comes with low costs and zero mortality risk. Online Term insurance plans come from Rs 5 Lakhs to Rs 5 Crores and beyond. On the other hand, Offline term insurance plans, though offers a high sum assured, in reality, individuals would take only for less sum assured as it comes with very high premiums.
4) Claim Settlement Ratio
Have you ever observed that when you plan to buy online term insurance, the first page what you see is claim settlement ratio. You would try to understand what claim settlement ratio is and then apply for high claim settlement ratio company term insurance plans. On the other hand in offline plans, you are relying on agent to decide your fate and they would choose a term insurance plan where he/she would get high commissions. I am not critizing agents here. But I don’t think any agent would explain to customers about the claim settlement ratio in offline term insurance plans.
I wanted to buy term insurance plan last year. I thought I would act like a normal individual and approached an insurance aggregator who was providing comparison of life insurance plans. The suggestion I received was to buy a life insurance plan for Rs 25,000+ premium for Rs 50 Lakhs risk coverage. Insurance company claims settlement ratio was below 75%. I asked why I should not buy ICICI Pru term plan or HDFC Term plan or SBI Term plan which was coming with 40% lesser premium and also claim settlement ratio is in Top-5. I have not received any call from them there after that 🙂
5) Flexibility in applying a term insurance plan
Online term insurance plans are more flexible than offline plan. Once you do your homework, just visit insurance company website, pay a premium and you would get your policy document to your home address unless you have any major disease where such insurance company would ask for clarifications. Most of the companies are exempting medical tests if you take Rs 50 Lakhs or below term insurance plan. You can pay premiums online every year. On the other hand, in offline term insurance, you need to do some visits to insurance company. Even you may need to get medical tests done even for low sum assured. Online term insurance plans score high in terms of flexibility.
6) Rider Benefits in Term Plans
One of the biggest drawbacks of online term insurance plan is, it comes only with death coverage + accidental death coverage (with additional premiums). However, for offline plans, there are some rider benefits available if you can pay additional premiums. Permanent disability, partial disability, Critical Illness Ridder benefits are available in offline mode.
Conclusion: If you observe about offline vs online term insurance plans comparison, it clearly indicates that one can go for online term insurance plans. Low Premiums, disclosure of facts through online, high sum assured with less costs, flexibility in applying are major positive factors for Online Term Insurance Plans.
Readers, what are your views about Online Vs Offline term insurance plan? Do you agree with my views or you have different opinion about it.
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Offline Vs Online Term Insurance Plan – Which is better option