How Flexible Can a Pure Term Insurance Plan be?

Future Generali India Life Insurance Company Limited (FGILI), has recently launched ‘Flexi Online Term Insurance Plan, a pure term insurance plan that will be available online only. While most other term plans offer a fixed lump sum as life cover, this plan brings in more variety to death benefit. One, however, has to make a visit to a doctor to undergo medical tests which would be arranged by the insurer. The documents such as income proof and KYC documents will have to be uploaded.

The Flexi Online Term Insurance Plan has 4 different options to choose from.

Option 1- Basic Life Cover: On death within the term of the policy, a lump sum is paid to the nominees. The policy ends thereafter.

Option 2- Fixed Income Protection: Under this option on the death of the insured, instead of a lump sum, a monthly income gets paid to nominee till the time when the insured would have turned 60 or for 10 years whichever is higher. The amount will depend on age, term, sum assured and therefore one may use the calculator on insurer’s website to customize the requirement.

Option 3- Increasing Income Protection: In order to meet the rising costs due to inflation, under this option, the coverage keeps increasing every year. The pay-outs will be monthly and will increase at a simple interest rate of 10 per cent from second policy year and thereafter every policy year. On the death of the insured, the increased monthly amount will start getting paid to your nominee and this amount will continue to increase every year for the period till the insured would have attained 60 years of age or for 120 months, whichever is higher.

Alternately, under both 2 and 3 the nominee has an option to take all monthly instalments as a lump sum at the time of claim settlement. All monthly pay-outs will be discounted at 6.5 per cent per annum compounded. However, the option of taking lump sum benefit cannot be exercised once the fixed income protection payment has commenced.

Option 4- My Protection Plan: All the above 3 options may be customised too. Under this option, one may create one’s own protection plan with combination of Basic Life Cover and Income Protection, either fixed or increasing. So, in addition to a lump sum, there would be monthly pay outs either fixed or increasing.

Let’s see how the annual premium ( inclusive of taxes) differ across the 4 options for someone who is 30 years old.

Basic Cover Option
1. Sum assured Rs 1.2 crore for a term of 45 years: Premium inclusive of taxes Rs 11,914.
2. Sum assured Rs 1.2 crore for a term of 30 years: Premium inclusive of taxes Rs 8,945.

Fixed Income Option
1. Monthly pay out of Rs 1, 25,000 for 35 years: Premium inclusive of taxes Rs 14,920

Increasing Income Protection option
1. Monthly pay out of Rs 1, 54,000 for 30 years: Premium inclusive of taxes Rs 43,764
2. Basic cover option + Fixed Income option
3. Sum assured Rs 1.2 crore for a term of 30 years + Monthly pay out of Rs 1, 25,000 for 30 years: Premium inclusive of taxes Rs 23,746.
4. Basic cover option + Increasing Income Protection option
Sum assured Rs 1.2 crore for a term of 30 years + Monthly pay out of Rs 1, 04,000 for 30 years: Premium inclusive of taxes Rs 38,500.

At a time when online shopping is on the increase, buying life insurance can be left behind. More and more people are buying life insurance especially pure term insurance plans online. The higher persistency of term plans which are bought online is making insurers take the online channel seriously. Persistency refers to policies that insurers retains as opposed to lapsation. It shows people who explore and buy term plans online, do it after carefully reading the terms and buy them with proper understanding of what they are buying. They therefore keep paying premium every year and does not lapse them. Get a confirmation from the insurer if the plan is available in your city. Also, compare at least 2-3 other insurers before you finalize.