<div><em>Online plans can be 30 per cent cheaper than offline versions, points out <strong>Sunil Dhawan</strong></em><br><br>Rs 10 lakh in 30 years, out of thin air! That’s the amount you can accumulate without even stretching your investible surplus but merely by shifting your buying decision from offline to online while purchasing an online term plan. All this not through Return-of-premium plans but pure term plans!</div><div> </div><div>The pure term insurance plans are low premium, high cover plans. The premiums paid towards them are entirely for risk coverage (covers the mortality charge) and therefore on surviving the term of the plan, one gets nothing. Many of us actually dislike this and instead shun term plans in favour of insurance plans with savings element. What they might overlook is that even in such savings-cum-insurance plans, a portion of premium is treated for risk coverage too. So, both in Term and Savings plan, the amount equal to providing mortality doesn’t end up coming back. </div><div> </div><div>From mobiles to grocery to real estate while online buying is spreading across customer’s preferences, getting a life protection isn’t behind. More and more people are logging on and buying insurance online. According to many insurers, a marked difference among policies bought offline through an agent or distributor and the ones bought online is emerging. The persistency ratio indicating how many policies are getting renewed by policyholders on renewal date is showing a higher number for online compared to offline. It goes on to show, more serious buying is happening when it comes to buying insurance online. </div><div> </div><div>But, does it actually helps you save money as it did when you last bought your Smartphone online. Let’s see. Annual premiums of term plan either bought online or offline varies a lot. The difference in premium of an offline and online term plan even from same insurer varies. Online plan can be 30 percent cheaper than its offline version. Illustratively, for a 30-year male, sum assured of Rs 1crore and for a term of 30-years, the annual premium for its offline plan comes to Rs 19,000, while the online version is available with same insurer at Rs 13,000 (including service tax for both). </div><div> </div><div>The difference of Rs 6,000 a year (31 per cent) is not all. Rather, use it to your advantage further. Investing this amount for 30-year, by when your term plan ends, could accumulate to Rs10 lakh, assuming growth in equity mutual funds happens at 10 percent annually. Over long periods, 12 per cent CAGR can be safely assumed to be the growth in equity. </div><div> </div><div>So, what you do now. Buy the online version of Term Plan and start SIP of Rs 500 a month (Rs 6, 000 a year saved by buying online). For 30-years, you are covered for Rs. 1-crore by paying Rs. 3.90 lakh in total (Rs 13, 000 *30 years) and get about Rs 10 lakh on surviving the term. </div><div> </div><div><strong><img alt="" src="http://bw-image.s3.amazonaws.com/online-plans-lrg.jpg" style="width: 565px; height: 295px; margin: 1px;"><br><br>There are few things to keep in mind while buying online term plans:</strong></div><div><strong>Location Check:</strong> Check, if the insurer is offering online term plans in your city. Not all cities are currently available for buying term plan online through net banking or credit cards. </div><div> </div><div><strong>Get a Briefing:</strong> Even before you start filling up the online application form, call up the insurer once. Get to know the process including that for medicals and sending of documents and most importantly the claim process. </div><div> </div><div><strong>Get What You Need:</strong> When you are buying a Smartphone nowadays, you are pretty clear that you need a 2GB RAM and not less. Similarly, get it confirmed from the insurer on your desired sum assured, term and payment options. At times, high sum assured is not available on online mode. The online version also have a lower term period compared to offline plans. Getting to know the insurer’s restrictions on features helps to avoid last-minute disappointments. </div><div> </div><div><strong>Newer Features: </strong>Of late, pure term plans are getting new look and newer features. Instead of getting a lump sum payment on death of policyholder, there can be a series of payment in addition to a lump sum. For example, 20 percent will be paid on death and rest on instalments till the end of term. Also, in some plans, the sum assured will keep on increasing every five years. Therefore, while selecting and comparing such plans be sure that similar plans are being compared. </div><div> </div><div><strong>Formalities:</strong> There could be medical tests as per insurer’s underwriting requirement to be undergone by anyone applying for term plans. Such tests are at insurer’s costs and report is generally shared with policyholders. For online term plans too, tests are done for which policyholder might have to set up appointment with the doctor (from approved list of insurer). At times, post the results, premium may show an increase as there could be a ‘loading’ in premium because of adverse results. The documents required as per insurer also needs to be sent across either digitally after scanning or by courier to insurer office. </div><div> </div><div><strong>Drawbacks: </strong> Getting all risks covered is always better than keeping some risk exposed to chance. See, if the online term plan allows you to attach an accident benefit rider or a critical illness rider. Online plans are restrictive in features. Unless you know what the insurer’s offline version offer, the online version, which could be a trimmed version wouldn’t be of much help. </div><div> </div><div>The absence of any agent or intermediary may not be a big drawback for all. For change in policy details such as address change, nomination etc, the agent comes handy. Remember, on online platform, it’s just you and the insurer’s call centre. Even at the time of claim, it’s the family of the deceased policyholder who might have to initiate the claim process and get the documentation in place.</div><div> </div><div><strong>The End Note:</strong> When it comes to buying pure term plans, do not merely go by premium amount. Go for the insurer with whom you are comfortable and is your preferred insurer. Remember, insurance is a long term business; your coverage too is for a long 25-30 years. Adequate insurance cover taking care of your family’s standard of living, from your preferred insurer is what one needs to spend quality time with them and have a good night sleep every night.</div><div> </div><div> </div><div> </div>
