BackBuying a term insurance plan? Compare features, not just premiums
Given the customisation options, now you should also look at the features of a term insurance plan and not just its premium
Premium
If you want life insurance then don’t look beyond a term plan: it’s the cheapest and the best way to insure your life and now you can buy it online. With the online platform making term insurance popular, insurers are coming up with various innovations to make it more attractive.
Innovations allow you to customise your plan. For instance, if you think your dependants will not be able to use the lump sum well, you can break it into smaller amounts to ensure periodic income for them. You could also choose to pay a part of the sum assured as lump sum and pay periodic income with the rest.
Given the customisation options, now you should also look at the features of a term plan and not just its premium.
Aviva Life Insurance Co. India Ltd recently added Aviva i-Term Smart plan to the stable of online term plans.
What is it?
It’s a plain vanilla online term plan. The policy will calculate the premium depending on the sum assured and factors such as your age and term.
Like other term plans, this one allows you to pay annually, semi-annually and monthly. On death of the policyholder during the term, the nominee gets the sum assured and the plan terminates. There are no maturity benefits and if you choose to surrender, you don’t get any surrender value either.
This plan only offers the lump sum payment option. “We also have a feature rich term plan that offers periodic income benefit. Our experience suggests that too many features tend to confuse customers when they are looking for a simplified solution, especially in this category. Hence, we have designed a simple proposition which the customer understands clearly," said Sapan Sane, product head, Aviva Life Insurance Co. India Ltd.
The plan comes with the option of a rider, an add-on insurance to a base policy. You can opt for a critical illness and disability rider, which covers 16 critical illnesses and total permanent disability. The sum assured under the rider can’t exceed the base sum assured. The premiums are subject to revision every five years. The premiums for the base term plan will remain fixed though.
The policy also allows you to increase the sum assured on certain events like marriage, child birth, or taking a home loan or in the fifth year of the term. However, you can do this only once during the term and not in the last 10 years of the term. The sum assured can go up only up to ₹ 25 lakh and the policyholder should be less than 45 years of age when doing it. While the insurer will bump up the sum assured without any medical examination, a new premium will apply.
Mint Money Take
Suppose a 35-year-old male buys this product for a policy term of 25 years and for a sum assured of ₹ 1 crore, the annual premium will come to ₹ 9,662. This is not the cheapest in the market, but the premiums are very competitive. You can look up premium rates of other insurance plans here.
According to Suresh Sadagopan, a Mumbai-based financial planner, the premium is not the only thing to look at. “Premium becomes important if the gap is very big. One needs to look at the features and the claims settlement ratio of an insurer," he said. “From a family point of view, plans that allow you periodic payment are better as it limits misuse of funds," he added.
In FY17, Aviva settled 91% of the claims going by the policy number and 84% going by the value. In both cases, there are companies that have a much higher settlement record.
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