Home/ Money / Personal Finance/  Term policies to have a larger share than earlier, say experts

The sales of pure term plans picked up between March and June 2020 but has now started to taper off, with fewer people buying these compared to the first quarter (April-June) of the financial year. In a term plan, policyholders pay for the life cover and don’t get back any money if they survive the term. In case of death, the insurer pays out the sum assured to the nominee or legal heirs.

Despite the tapering off, however, term plan sales continue to be higher than previous years thanks to the growing awareness among buyers, according to top executives of life insurance companies speaking at Mint Money Conversation presented by digibank by DBS that was held on 4 November.

“The perception of risk was the highest during the lockdown. People didn’t know what covid-19 was and how it could impact their families. We almost found people queuing up to buy a term plan," said Prashant Tripathy, managing director and chief executive officer, Max Life Insurance Co. Ltd.

“But when the government started lifting the lockdown from July onwards, the sales tapered off. It’s not at its peak, perhaps because the perception of risk has gone down a bit now. The sale of term plans is higher than in the past though not as high as what we saw from April to June," he added.

According to the top executives of life insurance companies, their product mix will change slightly from hereon. Term plans will have a larger share than they did in the previous years even though savings products would continue to contribute to the majority of the sales of over 90%.


During the initial days of the pandemic, individuals rushed to buy term plans due to the fear of the virus. They were looking at a high cover at an affordable cost. Most insurers saw unprecedented demand for term plans, including Life Insurance Corp. of India (LIC), which typically sells savings products.

“We have seen a shift in the attitude of customers. Our term insurance portfolio has almost doubled over the last year," said P. Muraleedharan, executive director, LIC.

According to him, consumers are not only opting for a term plan but also choosing higher sums assured than they did before.

SBI Life Insurance Co. Ltd saw a similar trend. One of the life insurer’s online products that is sold through State Bank of India’s Yono platform covered 400,000 lives from April to September. “It was more than double of what we did the whole of last year," said Mahesh Kumar Sharma, MD and CEO, SBI Life Insurance Co. Ltd.


With the government gradually lifting the lockdown, the sale of term plans has started slowing down compared to the April-June quarter, but they are still better than previous years.

“There is definitely going to be more tapering off once the vaccine is found or once there is a reduction in the number of cases. What will stay is that people will be more aware of the products that are available. They will also be aware of the danger of not having a cover," said Sharma.

“Some people may postpone the decision after this thing is through. But the demand will still be higher than the pre-covid-19 levels," he added.

As the mindset of consumers changes, the companies are also changing their business strategies of pushing pure term insurance plans and making people aware of the affordability. “We have always been pushing more of savings plans and less of term insurance. But, yes, there is a market shift. Consumers now have a better understanding of life insurance. It is also reflected in our business strategies," said Muraleedharan.

As consumers demand for term plans and insurers, too, push the product, policyholders would benefit, and mis-selling of insurance policies would come down. An individual should always opt for a plain-vanilla term plan and avoid combining investment with insurance.

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Updated: 09 Nov 2020, 09:05 AM IST
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