Why are online term insurance plans cheaper

Online term plans are comparatively cheaper than the traditional offline plans. This is because operating costs are lesser, like, there is no agent involved. Read this article to find how cheap are online term insurance plans and whether you should opt for them or not.

If you compare the premium cost of online and offline term plans, there is huge price difference. In some case, you can get online term plan for about 1/5th of the premium that you need to pay for offline term plan from the same company. The biggest benefit of the term plan is that they offer good life cover at very less premiums. Again, the online term plans make the life even easier for the investor. Some investors think that since online term plans are cheap, they are not as good as offline term plans. In this post, we will discuss the reasons behind online term plans being cheap in India.

How cheap is Term plan ?

The exact premium in a term plan depends on the age and health condition of applicant. Again, the premium also differs from one insurance company to another. It means that all conditions remaining same (age, tenure etc), a person has to pay different amount as premium for different companies. On an average, a healthy individual of 28 years can get online term insurance of Rs 50 lakh for 30 years by paying annual premium of 4000-6000. This is much cheaper in comparison to the offline mode.

Why are the Online term plans cheaper ?

There are a number of reasons behind this including:

  • There is no agent involved when you buy the term plan online. Thus, the commission of agent is discounted from the premium.

  • Another reason is that the operating cost in case of an online application is quite less for the insurance company. The companies have started rewarding the customers in return by charging less premiums.

  • Moreover, the competition is increasing in the field of online term insurance plans. New companies are coming in with their own customized plans. People have become smart these days and they always compare the prices of plans from different companies before buying one. As a result, companies have started to reduce the prices of already existing plans so as to lure more customers.

  • Now the final cause is that the target customers of these plans are healthy and young individuals in the age group of 25-35. As a result, there is less risk involved for the insurance companies and they charge less premium. On the other hand, traditional plans from LIC are for everyone. They allow aged individuals as well and thus the premium is high for such plans. It all depends on the risk factor involved. We can thus say that the USP of these online term plans is their price.

In brief, we can say that the insurance companies are charging less premiums for online term plans because it is economical and safer for them too. There is no risk involved in buying the term plan online provided you have basic knowledge of using the internet. You should however do proper research and compare the different plans. Also make sure that you are aware of all the minute details involved like special conditions related to insurance coverage, riders and nomination.

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Author: Partha K.28 Nov 2017 Member Level: Platinum   Points : 6

This is another excellent article from the author on insurance. I have seen many people who are very skeptical about the concept of term insurance. Even after explaining everything, they can't accept the fact that after completion of tenure they won't get anything. Such people mix insurance with investment and seem to be satisfied with meager returns paid by the Endowment policy and Money-back policy in the name of bonus.

Similarly, many people are skeptical about online policy and low rate of premium. In case of online policy, the premium is so low that people can't trust such policy. They don't have much faith on comparing policies offered by various companies. They blindly go by the advice (often wrong or inappropriate) of the agents, pay a huge premium and go for off-line policy. They don't understand the reasons behind low rate of premium in case of on-line policy are non-payment of commission to the agents and stiff competition among various insurance companies.

However, the new generation is slowly but steadily going for online term insurance policy after comparing the premium and other features offered by various insurance companies. I expect that all prospective policy takers would go through the article before subscribing to any life insurance policy.

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