What is the correct way to choose a Saral Jeevan Bima plan?

After a long wait, life insurers in India have started rolling out regulator-mandated standard term insurance plan called the Saral Jeevan Bima. To help individuals select the right term product, the Insurance Regulatory and Development Authority of India (Irdai) had asked all life insurers to launch these plans from 1 January 2021 with simple features as well as standard terms and conditions.

The minimum sum assured offered is ₹5 lakh, which could be extended up to ₹25 lakh in multiples of ₹50,000.

However, product launches were delayed as the regulator and companies were in talks over the flexibility in terms of maximum sum assured and the pricing (read more: bit.ly/3tC8EXV). As of now, six life insurance companies, including the SBI Life Insurance, are marketing this product.

As the features as well as the terms and conditions of the Saral Jeevan Bima are same across insurers, the key differentiator is pricing of the premium. However, according to experts, going solely by the premium is one of the biggest mistakes an individual can make while choosing this plan.

“This plan provides a higher issuance rate for lower-income segment groups, when compared with the other term plans available. While the features of the Saral Jeevan Bima plan are similar across insurers, customer should look at claim settlement ratio," said Santosh Agarwal, chief business officer, life insurance, Policybazaar.com.

The death claim settlement ratio is defined as the percentage of insurance claims settled by an insurer, compared with the total number of claims received. For example, if this ratio is 99%, it means that the insurer has settled (paid sum assured to the beneficiary) 99 death insurance claims out of every 100 insurance death claims received.

Moreover, Agarwal suggests that individuals should also look at ease of on-boarding as well as the insurer’s after-sales support and service, including renewal of the insurers, before choosing a plan. The pricing of the Saral Jeevan Bima is much higher when compared with regular term plans as insurers are not allowed to put filters in these products, said some experts.

Edelweiss Tokio Life Insurance Co. Ltd was the first insurer to launch the Saral Jeevan Bima plan in January. At an annual premium of ₹13,605, including taxes, the company’s standard term plan was priced more than twice its regular term plan at ₹6,464. The pricing is for a 40-year-old non-smoking male and has a sum assured of ₹25 lakh.

Moreover, SBI Life’s Saral Jeevan Bima plan costs ₹18,704. While the public life insurer doesn’t sell a cover with sum assured of ₹25 lakh under its regular term plan, the ₹35 lakh cover costs around ₹8,000 annually. Moreover, the pricing of these plans is higher as companies expect that the Saral Jeevan Bima will be bought by segments where the mortality experience is likely to be higher, say industry professionals.

However, the Saral Jeevan Bima has made it easier for less educated people or those who have a low income profile to buy a term insurance plan.Also, with the Saral Jeevan Bima, term plans that have a sum assured of as low as ₹5 lakh have been introduced. Affluent or highly educated individuals may be able to secure lower pricing for regular term plans rather than Saral Jeevan Bima given the structure of the insurance market.

Source: Live Mint

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