Term life insurance is the simplest type of life insurance policy that charges specific premiums from all policyholders. In return for the premium, the policyholder receives financial coverage for their nominees after their demise. Policyholders need to pay regular premiums to keep their plan active.Read more
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In recent months, there has been an increase in the rates of premiums for term life insurance. A hike of 2.79% has been seen after April 2021, which is the second quarter of the year. Term life insurance premium rates have experienced an increase in rates after the second wave of COVID-19.
Term insurance plans are pure protection policies that pay the life cover (sum assured) to a nominee/beneficiary if a policyholder passess away during the policy term. One of the important reason behind this rise over the last few years can be due to the increase in deaths because of COVID-19, leads to humongous anount of pressure on term insurance companies.
Especially after COVID-19 has hit the planet, there has been a subsequent increase in term insurance rates. This is because of the high number of deaths that had taken place due to the virus. After the severe impacts of the second wave of COVID-19, mortality rates have been at an all-time high in the country. It has become the primary reason behind the rise in rates, as more and more people are now fearful about the uncertainty of death.
It is always suggested that customers should go for a high claim settlement ratio and solvency ratio before buying life insurance plans. You can also customise your plan coverage by choosing suitable term riders.
It is always favourable to buy term insurance at any stage in life for safeguarding your family after your demise. Although the factor of term insurance premium increase in 2023 is prevalent, term life insurance is a necessity for everyone. It could be a matter of a monthly, quarterly, half yearly, or annual desposit for you, but in the long run, your family is going to be secured and be prepared financially if another calamity like COVID-19 was to resurface. The rising rates of premiums must not deter you while purchasing financial coverage for your loved ones.
Before purchasing, make sure you are fully informed about hiked rates of premium. This would help you to plan your finances accordingly. You can do so by calling the customer care service of the insurer who you are planning to buy your policy from. Or you can also visit Policybazaar’s website for detailed information of all the updated premium rates of more than 15 insurance companies. Also, forecasting your future expenditure would be affected by proactive planning of premium.
People who have policies bought before March 2021 will not have to pay increased premiums for their existing term insurance plans. However, those currently planning to buy it must not be discouraged by the increased prices, as it will be most beneficial financial decision during such times of uncertain calamity. All insurance companies have term plans that suit every pocket. This surge could be seen as profitable for the companies, premium rates in India are some of the lowest in the world.
Besides multiple unfortunate casualties, COVID-19 has disrupted every other function of our society. From health to the economic crisis, it has shown us all the significance of a strong financial pillar and more importantly, the value of family.
Almost every insurance company has contributed to the premium rise till now. This has come with several problems for people who are finding it difficult to adjust to the new prices. This forces us to look into the actual reasons behind the surge.
The large number of mortalities in such a short time compelled insurance companies to revise their premium rates for term life insurance plans.
Due to the increase in mortality rates, the prices of term insurance products have been affected. Insurers began dwindling in the scenario and have incurred losses. This is why they raised premium prices to stay afloat in the market.
It is common knowledge that all insurance-providing companies get their plans reinsured to mitigate their risk of incurring losses in the future.
As of last year (2020), reinsurance companies had already increased their premium rates. These hikes were initially endured by insurers while bearing huge losses on their term life insurance policies. In the new financial year, insurers were set to change their pricing for premiums and did so with immediate effect.
There is a long list of insurance companies providing financial services in the country. Each of them is offering several different types of term insurance plans with varying ranges of premium rates as per the market fluctuations.
The aggressive competitive prices of term insurance premiums have led companies to decide upon changing their pricing strategy altogether. This price rise was long overdue as India has one of the lowest premium rates in the world.
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While causing difficulties with the general public with hiked rates, the increase in term insurance premium rates comes with its advantages. Decisions such as this price hike are not reached upon in a matter of weeks.
It is after great evaluation and market analysis that the insurers reach to a point at which they want to raise premium prices, however, knowing that it would most certainly cause issues with people buying term insurance.
Some of such benefits as to why you should consider these increased rates advantageous are as follows:
Benefit towards Insurance Companies
By increasing premium rates, the number of defaulters could be considerably lowered. The risk of people not paying their premiums on time may also be lower.
Beneficial towards Indian Economy
As mentioned before, India is one of the few countries in the world which offers such low premium rates for term life insurance. If policyholders pay more money in the form of premiums, the economy would have a positive flow of funds that further contributes to strengthening the country’s GDP.
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