Confused about buying term insurance via online or offline channel? Here’s help

Term insurance policies are the simplest form of life insurance that pays out the sum assured if the insured dies during the term of the policy. The life insurance industry, which has traditionally been an offline-focused business, saw a big rise in online sales for term insurance plans after the Covid-19 broke out.

“Covid-19 has reinforced the need for insurance and more importantly contactless buying process. There have been clear shifts in consumer needs towards buying insurance, with increased risk awareness. People have realized the significance of buying life as well as health insurance," said Indraneel Chatterjee, co-founder and principal officer, Renewbuy.com, an online insurance aggregator.

Individuals can buy a term plan through an agent, which is an offline channel or via online insurance aggregators. Some insurance brokers also sell policies via both channels. We look at the benefits of both the channels.

Online

According to experts buying term insurance through online channels give more transparency, clarity and credibility to the consumers. Consumers can look for multiple insurance product options under one umbrella, which gives them the liberty to choose the best plan.

“Buying term insurance online is the most convenient and cost-effective way. Online term plans are on average 15% cheaper than offline insurance services. Online plans offer high sum assured for a lower premium along with the choice of products," said Chatterjee.

Moreover, contactless, digital platforms enable a consumer in the smallest town of the country to buy a policy at the click of a button, without any physical contact or physical documentation, he added.

Offline

Sanjiv Bajaj, joint chairman and managing director of Bajaj Capital Ltd, however, doesn’t ascribe to the notion that online term insurance rates are always cheaper than offline premium prices. “The offline and online rates for term insurance are equal in a lot of places. This is because the online channel carries a higher risk for insurance companies as the underwriting process is not as good as if done through a broker."

“Moreover, when a person compares buying online insurance to an agent—who might represent one or two companies—he or she may not have the best rates. But when you go through a broker, then you will get all the options as you would get online, and at the same time you would exactly the same rate weather you buy online or offline," he added. Another advantage of buying via the offline channel is additional servicing.

“We have seen that 70% of the total claims are initiated by the broker and not by the family because the customer’s family doesn’t know about the policy or are unaware of the process. Many times, when we approach the client for renewal, we get to know some the mishap has happened. So, at many times the broker initiates the claim. This benefit will not be available if the policy is bought via online channels," Bajaj added.

Things to keep in mind

Consumers should look out for clear and precise information about the products and their benefits. "It is important for consumers to understand their risk tolerance, the product types are appropriate for their family needs, which insurers offer those products," Chatterjee said.

According to Bajaj, one of the most important aspects that people should keep in mind is that the application form is filed without any mistakes or wrong disclosures. Any wrong information regarding the policyholder’s health or personal information may lead to the rejection of the claim at a later stage.

Another mistake that people should avoid is buying a policy with the cheapest rate. “You need the longest policy, because you are at a higher risk as you grow older," Bajaj said. Moreover, it is advisable to be guided by an insurance adviser or partner, who can help you choose the right term insurance plan, considering all your needs.

Source: Live Mint

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