Online term plan
When it comes to financially securing the future of your family in case of any mishaps, term insurance fares pretty well. A term plan is the purest form of insurance and its only focus is to provide you with a life cover. As it does not have any saving components, the insurance premiums are lower when compared to traditional endowment plans.But if you choose to buy term insurance online, well it is a different ball game altogether.
The price difference between online and offline term plans have the abilityto give you a mild shock in fact. On comparison, you can see a difference of about 25-30%between the two purchase modes. Which one do you think will be lighter on your wallet? If your guess is online, your guess is absolutely correct. Online term plan is way cheaper than its offline counterpart and has some more tricks up its sleeves. Apart from being easy on your pockets, online term insurance is also very efficient and has a much shorter turnaround time.
Why the difference?
Once you spot the difference in the premium prices, the next obvious question is, why is there so much of variance among them.If you read your way around and do mild research, you will come across a common theme.
In the traditional purchase mode or offline plans, you had the option of buying with the help of agents, consultants or directly from the branch office. Those all factors add to the cost of the premium. On the other hand, an online term plan is cheaper as the insurance companies do not have to pay for all of these intermediaries.Apart from the agents, few of the administrative costs also evaporate, thus causing a drop in the premium prices.
Though that is technically correct but if you look closer there is more than what meets the eye. The commission for insurance agents is the maximum in the first year and reduces as the years go by. If you assume the commission to be 25%, that is only for the first year. With consecutive years, the commissions would go down to 10-20% and eventually less than 10% in few more years. So if this was the primary reason, the variance should be about 10-15% and not the 25-30% that we see.
Primary reason for the difference
The online term plan is more affordable than its offline mode because of the target audience it serves. Insurance companies believe that people who go for online plans are relatively less risky. The simple assumptions are that these people have better lifestyle habits and also have access to much better health care systems. This is where the location of your residence comes into the picture.
People in bigger cities such as Mumbai or Bengaluru are more likely to outlive the duration of the term when compared with people staying in tier 4 and tier 5 cities. As the chances of outliving the term are higher, insurance providers do not have to worry about the claims and thus the premium prices go down. Insurance companies know people from different cities have different mortality rates and also the risk profile of the individuals vary. These also help in reducing the premium costs further down.
The added advantage of buying a term insurance plan online is that you get to interact with the ‘Brand’ closely. Whereas if you buy the same plan offline, you wouldn’t get any important information of the insurer as well as the product you wish to buy.
Through the online means, not only does the buying gets easier, but, it also helps you to compare the policies, its features, benefits etc. Besides, you also get to check the reviews of the insurer as well as the term plan you wish to opt for. This helps you to narrow down your search on the best term insurance plan and reduce the risk of frauds! And let me tell you that the practice of buying term insurance online would help you to eliminate the ‘miss-selling’ part too! If you are looking for a term plan and want to save substantial amount year on year, going online is the most effective way. Online term plan helps you to choose from various insurance providers based on their premium amount quotes and also features that they provide. This makes the purchase of insurance an easy affair.