Policies sold online are cheaper and loaded with features

THE internet is full of advertisements from life insurance companies selling Rs 1 crore life cover for annual premium as low as Rs 6,000. But, what are these policies and what benefits do they offer?
Policy features: These are term insurance or pure insurance policies. Term plans do not have any investment components and maturity benefits. If the policyholder outlives the tenure of the policy, he doesn't get any return on premium.

Experts suggest that term plans should be bought by all individuals who have financial liability because they have high life cover for a low premium.

Buy term insurance online: To cover yourself from unforeseen risks in the future, buy term plans or pure insurance plans online and preferably not those sold through regular channels.
Term plans sold online are cheaper because insurers pass on the cost saved on distribution (agent's commission) and are loaded with additional features.

Term plans sold online are 20-25 per cent cheaper than those sold through an insurance agent.

Also, the marketing costs of the company and perceived risk of death are significantly lower with higher persistency (renewal rate) because policyholders have opted for the product themselves.

Insurance companies are adding extra benefits to make their online term plans more attractive. Several insurers have also started offering return on premium option to customers who want to get maturity value.

Return on premium option: In return on premium option, on maturity of a term plan, the insurance company will return the entire premium charged to the policyholder; however, it will not pay any interest on return on premium. The premium payable on return on premium term policies will be higher than that payable on a pure term policy for the same cover.

Insurers say sale of term or pure life insurance plans has gone up by 30-40 per cent with increased aware ness about the need for life insurance.

Term plans sales are going up due to increase in awareness. Number of term plans and total sum assured have gone up significantly.

But, total premium earned from term plans is not very significant because premium for term plans is low.

Most life insurers have begun offering term plans especially designed to be sold online. Premium on term plans vary from company to company. For a 35year-old male, for a life insurance cover of Rs 1 crore, premium can vary between Rs 10,675 to Rs 47,755.

Each company fixes premium depending on risk perception of a customer.
Some insurers, which do not want to be aggressive in this product space, also have archaic premium structures.

However, select your insurance company after carefully reading the exclusions in your insurance policy not just on the premium.

You can also enhance your life cover by adding riders to the covers by paying a small additional sum.

Popular riders include critical illness and personal accident.