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'Should I buy an online term insurance policy?'

Dailybhaskar.com  
The author of the article, Deepak Yohannan, is CEO of MyInsuranceClub.com, a price and features comparison website for insurance products in India. For related queries, please write to him at deepak@myinsuranceclub.com

Should I buy an online term insurance policy?
 
Everyone around us is talking about low-cost online term life insurance plans. Off late, Term plans are a hot topic for discussion in office cafeteria, finance talk shows, online forums, get-togethers etc. Coverage amount of 1 and 2 crores which were unheard of until a year ago have become a common thing now.

So are online term plans really good or is there some kind of catch? Why are private companies all of a sudden offering cheaper term plans? Why are some companies not conducting medical tests before issuing the policy? Will they only collect the money and refuse the claim? And most importantly, where is the online term policy of LIC?
 
About Term Plans

Before answering these questions, lets understand the basics of term insurance for the less finance-savvy readers – Term plan is the most basic kind of life insurance wherein if the policyholder dies during the policy period then his family member (nominated person) gets a certain amount (sum assured). This is called the death benefit. But if the policy period is over and the policyholder is still alive then the insurance company does not remit any money back. Thus, there is no benefit on maturity of the policy.

However, the most important feature of a term plan is that you will get a very high sum assured for a really low premium amount. For example, A 50-lac cover for a 35-year old male will cost him approximately Rs.5,000/- per annum. This is a really good deal, if you ask me. 

Who needs Term plans?

If you are pondering over whether you need a term plan or not, then the answer is simple - Yes! Everyone who earns and has dependent(s) needs a term plan. It is a life long pursuit for each of us to earn, save, and look after our parents, spouse, children(s), other family members and last but not least – ourselves! But what if life is not long enough? Plan A should always be our income and savings, but Plan B should also be in place. And by Plan B I am referring to an adequate term insurance cover.
 
Online Term Plans

Internet is fast picking up as an important channel of distribution for many products and services. Many organisations have realised that the online channel is fast, efficient, low-cost and transparent. Insurance companies distribute their policies through individual agents, branches, banks, brokers and several other channels. The cost of distribution (commission) is very high and insurance companies continue to pay commission to the distributor every year throughout the entire policy term. Recently, they adopted the online mode of selling and found it to be very effective. Insurance companies don’t have to pay hefty commissions and hence they pass on this saving to the customers by reducing the premium amount. 
 
Advantages of Online term plans

The benefit of all pure term plans is the same – benefit amount is paid to the nominee on death of the policyholder. However, some of the advantages of buying term plans directly from the website of the insurance company are:

1) Lower premium rates
2) Faster process – Instant policy issuance in some cases
3) Less paperwork involved (often paperless process)
4) Completely transparent
5) No health / medical check up for certain age groups
 
Term insurance policy gives a person the much needed peace of mind. I cannot think of any financial product or investment which will give such high protection cover. Online term plans with their attractive pricing are a boon for us and we should not let any general apprehensions keep us away from availing the benefits. 
  
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