Spend, Save and Invest Smartly
Where does one look for a solution to a problem these days. Chances are "The Internet". Internet has become a source of knowledge like a well whose water never dries up. Ever wondered what are the practical applications of the internet to the financial services industry. A decade ago when one went to the bank one had to stand in a queue for simple branch banking operations. Today the use of National Electronic Fund Transfer and Real Time Gross Settlement enables fund transfers in seconds. Mobile banking using smart phones and the use of near field communications has revolutionized the banking industry. It is a small matter that the insurance sector too has benefited heavily from the internet and insurance policies especially term insurance policies can easily be purchased online. The payment of the premiums can also be done online. Internet has surely changed the world of banking and insurance for the better. Remember "The Best Way To Predict The Future Is To Invent It".
Online term insurance policies are cheaper than their offline counterparts by a percentage which may be as high as 50%.Wondering Why This Is So? The online term insurance policy doesn’t have an intermediatory or an agent who tries to push this product in exchange for a commission. As one deals directly with the Company the costs for the Company are lesser. This serves as an incentive for the Company to give its customers what is known as a"Good Deal" One can purchase a term insurance policy of a Crore for as less an INR 30 per day. Death doesn’t make any distinctions and knocks on the doors of both the rich and the poor. If one is a HNI and in good physical health he should pick up an online term policy of a Crore paying a ridiculously small amount of INR 30 a day. The online policy has a through medical checkup. The lesser premiums and the easy method of purchase has made these policies a hit among the youth of our nation who are internet savvy. A number of websites are available today with a wide variety of online term insurance plans and choosing the best plan is up to the individual. The coverage of the online term plan is also higher than the offline term plan as it is perceived that those who purchase online term polices are rich. One of the main grouses widely heard is that I purchased an online term insurance policy a couple of years ago and now similar policies are available for a lesser amount. So What Should I Do? Many a time individuals discontinue such policies and take up newer policies. However one needs to make a note of all the factors involved before discontinuing the current policy.
The process of taking up an online term insurance policy is a recent trend. Insurance Companies tend to thoroughly investigate claims made within a couple of years of taking up an insurance policy .Insurers have to settle these claims within a period of six months. In the case of claims made after a period of three years from taking these policies the claim settlement period is three months. Even though it is too early to predict how claim settlement will pan out there is no reason to believe that it will not be a success. People tend to be more open online and since no agent or third party is involved important details are rarely hidden. The agents might fill the forms themselves and certain important information might be misrepresented. This might lead to that claim being rejected. In the online policy since one fills the form himself, submits the relevant documents and goes through a detailed medical checkup the chances of claims being rejected are slim. The online term insurance policies tend to have a higher coverage amount while compared to an offline policy. This calls for a through medical checkup as insurance firms are not in the business of charity. This means that online insurance companies do pay up their claims but one needs to study the claim repudiation ratio. This is basically the percentage of claims rejected by the insurance agencies and is a better ratio to measure the claim settlement of the insurance company. This is because of wrong or incorrect information filled up in the term policy, hiding and failure to disclose certain relevant facts as well as mis selling of these policies by insurance agents who just fill up anything in order that one takes up the insurance policy. This results in a higher claim repudiation ratio in an offline policy than in an online policy. This means that genuine claims are very rarely rejected in an online policy.
One must always keep a note of the riders available in that online term insurance policy. An accidental rider benefit can be of immense use in that online term insurance policy. If the cover is INR 25 Lakhs and one takes an additional cover of INR 15 Lakhs through an accidental rider by paying a slightly higher premium and one were to die in an accident then the mortality cover is INR 40 Lakhs. Certainly Food For Thought. A critical Illness rider is another addition one can think of which provides payments as soon as a critical illness is detected. It is very necessary that the online term insurance policy provides a cover across your working life. If one takes an online term insurance policy at the age of 30 years it should last him till the age of 60 Years if one plans to retire at the age of 60.The coverage amount should be at least 10 times ones annual income.
One has surely heard the phrase "Early Bird Gets The Best Worm" .If one has to die rich then one needs to pick that online term plan early. If one picks up a term plan at the age of 25 Years for a tenure that covers his working life mainly 35 Years assuming he works till 60 Years the premium would be INR 6000-9000 per annum for a Crore. The premium subsequently goes up as a person reaches the age of 30.The premiums are in a range of INR 9000-13000 per annum for a Crore and the tenure would be of 30 Years. Similarly if a person picks up a term plan at the age of 40 Years the tenure is 20 Years and the premiums are in the range of INR 15000-22000 per annum for a Crore. What Do You Learn From This? Buck Up. Take That Online Term Policy Now.
Many a time one purchases an online term insurance policy owing to low premium costs. Do these premiums remain constant? No There Is A Race To The Bottom. This results in a reduction in the value of premiums with time. After a couple of years one finds the premiums are even lower than what they were when one had purchased that online term policy .So What Should One Do ? Should One Surrender This Policy And Pick Up A New Policy?One needs to remember that any claim that is made within a period of 2 Years from purchasing an online term insurance policy is considered as an "Early Claim". An early claim is naturally thoroughly investigated and the claim settlement can be a time consuming process. If one were to swap ones online term policy just by looking at the price factor then one would certainly be making a mistake. If one made a claim after swapping the older policy for a newer policy and had a claim a year later this would come under the "Early Claim" category. One has to note that in the race to procure the lowest premiums insurance Companies have certain costs such as administration costs and so on which are fixed. This means that at a certain point of time premiums are forced to rise again. Clearly there is a threshold point in the race to the bottom.
One knows that any product has its pros and its cons. The same applies to an online term insurance policy. Most of the insurance products are simple vanilla products or what are known as the basic models in the case of term insurance. It is not easy to customize these products or their premiums to suit all our needs .One of the most important factors needed to be taken into consideration is the rider benefits Riders are not as easily available in an online policy as when compared to an offline policy and rider benefits have to be purchased paying an additional premium. Even though the basic online term policy may be stated to have a low premium the addition of riders to compensate these plans may push up their costs when compared to their offline variants where riders are readily available. Another important point to be noted is the premium of an online policy might increase by as high as 25% after medical tests are taken. Currently a number of online term insurance policies have done away with the practice of raising the premiums after conducting medicals. A person taking up these policies needs to be financially aware or has to have knowledge of insurance when purchasing such policies .If one is not well versed with insurance products taking the help of an insurance agent is advised. Of course the claim filing process involves directly meeting up face to face with ones insurer and the online process cannot be followed .One has to study the insurance products as well as verify the authenticity of the website as well as the product being displayed on the website. One has to check the features of the products as well as their compatibility to ones needs and see if all the features displayed are actually available. Always maintain a copy of the e-transactions pertaining to payments as proof that the premiums have been payed. This helps to solve a lot of heartburn at a later stage.
I would like to end this article with a famous saying "Success Is The Sum Of Small Efforts Repeated Day In And Day Out". Remember that "Time And Tide Waits For No Man". So do not unnecessarily postpone the purchase of that term insurance policy. Procrastination has never helped anyone. If one has to purchase a term insurance plan it is best purchased today. I would like to remind you that the team of Financial Planners at Moneymindz.com are always there for you to plan your insurance needs in a most effective and efficient manner.