Beyond life cover: Key benefits of term insurance plans in India Recent innovations by Indian life insurance companies include special discounts for salaried individuals, simplified medical tests, rebalancing cover options, and premium back options
Term plans were introduced to address the uncertainties of life and its unwanted impact on dependents. The life-insured individual/policyholder pays a premium, and the life-insured receives life cover for a predetermined duration of time. If the life insured dies during the policy term, the policy nominee/beneficiary receives a predetermined amount as a death benefit from the life insurance company, and the policy terminates.#sr_widget.onDemand p, #stock_pro.onDemand p{font-size: 14px;line-height: 1.28;} .onDemand .live_stock{left:17px;padding:1px 3px 1px 5px;font-size:12px;font-weight:600;line-height:18px;top:9px} #sr_widget.onDemand .sr_desc{margin:0 auto 0;} #sr_widget.onDemand .sr_desc{color: #024d99;margin-top:10px;} #sr_widget.onDemand .crypto .live_stock .lb-icon{8px 6px 5px 3px !important} #sr_widget.crypto.onDemand a.text{border-bottom:1px solid #ccc;padding-bottom:5px;display:block;width:100%} #sr_widget.onDemand .sr_desc .text p, #stock_pro.onDemand .sr_desc .text p{font-size:12px;font-weight:400;}
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On the other hand, if the life insured outlives the policy term, the term plan terminates automatically, and traditionally no maturity benefits were available in such cases. However, considering the remarkable similarity of all term plans irrespective of the life insurance company, more and more insurers are introducing additional features to differentiate their offerings from those of their competition. Let’s take a closer look at how some of India’s top life insurance companies are attempting to do this.
Increased focus on benefits for salaried individuals
Salaried individuals typically have a predictable and regular income. For life insurance companies, this makes them a prime candidate who are ideally placed to pay term insurance premiums promptly over an extended period. So, life insurance companies have devised various ways to woo salaried individuals. Notable features designed to purchase a term plan more lucrative and affordable for salaried men and women include:
Special discounts
To reduce the cost of a term plan, leading life insurance companies in India are offering discounts on first-year premiums to salaried individuals. More significantly, salaried women might even be eligible for higher discounts in some cases, which may apply to not just the first-year premium but also to all the policy premiums payable over the policy term.
Simplified medicals
Traditionally the mandatory medical tests required at the time of term insurance purchase have required the physical presence of the life insured at a designated medical testing centre. To enhance the ease of a term plan purchase for salaried individuals, video medicals are now allowed in many cases and the process can be conveniently completed from home without the need to physically visit a test centre.
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Rebalancing cover option
Typically, term plans offer a life cover benefit that remains unchanged over the policy term and the policyholder may choose to purchase add-ons such as accidental death benefits separately to augment protection. Now life insurance companies are introducing term plan variants that have the option of rebalancing cover that offers the benefit of life cover and accident cover without the need to purchase an add-on.
Such plans provide a higher payout during the initial tenure of the policy in the case of death due to an accident while also offering the standard life cover benefit post the initial period. These plans can help enhance the protection offered under the term plan cost-effectively.
Premium back option
Traditionally term insurance plans have lacked maturity benefits and this has often emerged as a barrier to purchase. To address this, life insurance companies have introduced optional exit clauses that can be availed to get a refund on premiums already paid to keep the policy active.
The policy terminates once this premium back option is availed and the refund of premiums paid is made by the insurer. This option effectively decreases the cost of availing the life insurance policy to zero and is designed to make the plans even more affordable.
The below table illustrates the quantum of key benefits that salaried men and women may be eligible to avail when opting for a term plan from leading life insurance companies in India:
Salaried Men
Axis Max Life
HDFC Life
ICICI Prudential
Tata AIA
Claims settled* 23-24
99.7%
99.5%
99.2%
99.1%
No of claims* 23-24
19659
19436
13523
6431
Claims settlement promise
3 hours
24 hours
24 hours
4 hours
First-year discount
15%
5%
10%
15%
Premium back option (Excluding GST)
200%
100%
100%
No
Critical illness covered
64
60
34
40
Life + Accident rebalancing cover
Yes
No
No
No
*The publicly available claims data does not segregate claims basis gender/occupation/residential status.
Salaried Woman
Axis Max Life
HDFC Life
ICICI Prudential
Tata AIA
Claims settled* 23-24
99.7%
99.5%
99.2%
99.1%
No of claims* 23-24
19659
19436
13523
6431
Claims settlement promise
3 hours
24 hours
24 hours
4 hours
First-year discount
27.75%
5%
10%
15%
Premium back option
200%
100%
100%
No
Critical illness covered
64
60
34
40
Free sum assured top-up option
Yes
No
No
No
*The publicly available claims data does not segregate claims basis gender/occupation/residential status.
What are the unique benefits offered to self-employed by Life Insurance Companies?
Typically, the features of a term plan do not vary irrespective of the type of individual who is purchasing the plan. However, life insurance companies also tend to offer some unique benefits to make their policy more attractive to self-employed individuals. Such benefits may include the following:
Discount on premiums
Many leading life insurance providers in India are offering discounts on term insurance premiums to self-employed individuals similar to salaried individuals. Depending on the insurer and life insurance plan chosen the quantum of such discounts may vary.
Additionally, such premium discounts for self-employed can be either a one-time discount on the first-year premium or a lifetime discount payable over the entire premium payment term of the policy. These offers can help decrease the overall cost incurred by a self-employed individual purchasing a term plan.
Reduced documentation
Unlike salaried individuals, self-employed individuals cannot provide income proof such as salary slips and Form 16. This can lead to complications, as documents such as certified Profit and Loss Statement, Business Turnover Proof, etc. may not be readily available.
To mitigate this issue to some extent and streamline the term insurance purchase process, many life insurance companies are offering the option of reduced documentation such as no income proof requirement for self-employed individuals subject to key terms and conditions. The introduction of such simplified documentation can help self-employed individuals enhance the protection for their family members in the case of their untimely demise.
The below table illustrates the key features of term plans offered by leading life insurance companies in India to self-employed individuals:
Self Employed
Axis Max Life
HDFC Life
ICICI Prudential
Tata AIA
Claims settled* 23-24
99.7%
99.5%
99.2%
99.1%
No of claims* 23-24
19659
19436
13523
6431
Claims settlement promise
3 hours
24 hours
24 hours
4 hours
First-year discount
12%
5%
5%
10%
Lifetime online discount
Yes
No
Yes
No
Premium back option (Excluding GST)
100%
100%
100%
No
Critical illness covered
64
60
34
40
*The publicly available claims data does not segregate claims basis gender/occupation/residential status.
How are Term Plans for non-resident Indians evolving to meet present-day needs?
Non-resident Indians often stay out of the country for work, however, many have loved ones living in India who need financial protection in case of their unexpected demise in the foreign country. This is where term plans for NRIs have gained greater popularity in recent years.
While NRI term plans typically offer the same benefits as term plans purchased by resident Indians, many insurers are offering customisations designed to ease the process of purchasing these policies. Below are some key benefits of NRI term plans that one needs to keep in mind:
Higher video medical eligibility
As already mentioned, video medical tests eliminate the need to physically visit a designated test center. This is especially relevant to NRIs who might be living in a foreign country where the life insurer operates relatively few test centres, if any.
This way many life insurers now allow video medical tests to be conducted for term policies that offer a life cover as high as Rs.5 crores. This can help ease the term insurance buying process for NRIs while enabling them to protect their loved ones by purchasing a term plan in India at an affordable cost.
The below table illustrates other key NRI Term Plan features offered by different life insurance companies in India:
NRI
Axis Max Life
HDFC Life
ICICI Prudential
Tata AIA
Claims settled* 23-24
99.7%
99.5%
99.2%
99.1%
No of claims* 23-24
19659
19436
13523
6431
Claims settlement promise
3 hours
24 hours
24 hours
4 hours
First-year discount
15%
5%
10%
15%
Premium back option
200%
100%
100%
No
Life+Accident rebalancing cover
Yes
No
No
No
*The publicly available claims data does not segregate claims basis gender/occupation/residential status.
As you can see, NRI term plan features and benefits are remarkably similar to term plans offered to resident Indians, however, the quantum of these benefits tends to differ from one insurer to another.
What else to consider when purchasing a term plan?
Purchasing a pure protection plan is a long-term commitment as the policy tenure of these plans can easily extend into decades. What’s more the best way to ensure the affordability of these plans is to purchase these policies early in life. As a result, careful consideration of various aspects of term plans is essential for choosing one that fits your unique needs. Below are some more aspects of term plans that must be taken into account.
Availability of optional add-ons
Add-ons or riders are optional in most cases and are designed to augment the protection offered under the base plan. Typical benefits of add-ons include additional financial protection in the case of accidental death, diagnosis of a critical or terminal illness, waiver of future premiums under specific circumstances, etc. Since these often require the payment of additional premiums, they can increase the overall premium cost of the term plan. So, do check the policy document carefully in order to know which add-ons are available with your term plan and are ideally suited to your unique protection needs.
Claims settlement experience
As part of IRDAI guidelines, every life insurance company in India is required to publicly disclose the number of claims it has received, settled, and rejected in a financial year by publishing it on its website. Along with this, each company also publishes the claim settlement ratio for the applicable financial year.
These details illustrate how efficiently a life insurance company has managed the claims it has received on outstanding policies. As a rule of thumb, a high claim settlement ratio and a high number of claims settled help in identifying the leaders in the field. So choosing a company that has a good track record concerning claim settlement is an easy way to identify an insurer that is well-placed to fulfill your protection needs.
Additionally, many insurers are attempting to streamline the process of claims even further through the introduction of quick claim promises. These are designed to provide a specified sum of money to the policy nominee/beneficiary within a short period (usually within a few hours) of the submission of key documents required for making a claim.
Once the claim is processed the balance life cover amount is paid out to the nominee/beneficiary. Do check if your term plan offers such a benefit as it can help policy nominee(s)/beneficiaries better manage immediate financial needs arising from the demise of a loved one.
As the protection needs change, more and more life insurance companies are realising that basic protection plans might no longer be enough to suit the needs of wide sections of society. As a result, many newly launched term plans from a leading insurer in India have been tweaked to incorporate unique customisations that are designed to provide benefits and features that go beyond just providing a lump sum payout in the case of the demise of the life insured.
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This story originally appeared on: India Times - Author:Faqs of Insurances
