The state-owned life insurer LIC, recently launched an online term insurance plan which is slightly expensive than many online pure protection offerings from private companies.
Online term plans have become the first choice of insurance buyers ever since their launch in 2009. The premium of an online term plan is generally low as there are no middlemen involved; so the agent's commission is passed on to the customer. Also, the online buyer is looked upon as a low-risk customer by insurance providers.
LIC’s term plan is offered under two categories – smoker (aggregate) and non-smoker. Under the non-smoker category, the minimum sum assured is Rs 50 lakh and the premium rates are lesser than the aggregate category. In case of the aggregate category the minimum sum assured is Rs 25 lakh. The minimum entry age is 18 years while the maximum entry age is 60 years. The policy tenure can be chosen between 10 and 35 years.
If you are habitual of smoking or use tobacco in other forms, your premium will be approx 25-30% more than that of a non-smoker. But if you hide crucial facts relating to your health, social habits, it is quite likely that your claim will face rejection.
The cover loses its validity when the policyholder reaches 75 years.Whereas at the lower age bracket say 25 years, the premium rates of LIC’s e-term plan are competitive, the rates in the higher age category are higher when compared with the rates provided by private players. The mode of payment of premium is annual only and through online mode.
Though online term plans have become famous, their true potential is yet to be realized. A joint study by Max Life Insurance and Nielsen tells that four out of every five people who begin the process to buy insurance online drop out before completing the purchase. The study does not state the exact reason, but one reason could be that buyers research policies of at least 3-4 insurers before making a purchase decision.
Another reason is that some buyers are skeptical of buying from a private company. While it is a misconception that private companies will not honor claims, the PSU status of LIC will definitely help shed this negative view.
LIC boasts of an excellent claim settlement record — it paid out 97.73% of the claims it received, according to Insurance Regulatory and Development Authority's (IRDA) annual report for 2012-13, this helps LIC to score over its private sector counterparts.