Don't shift to online health plans to save costs

With significantly low costs and a sales pitch of almost no medical tests (for sum assured up to Rs 50 lakh or Rs 5 milliom), online term plans have become quite a rage.

Almost all companies offer such plans.

The latest to jump on the bandwagon is Life Insurance Corporation of India, the largest in the segment.

Compared to offline plans, which are sold through agents and banks, online plans have lower premia (30-50 per cent lower).

If you have purchased an offline term plan, should you shift to an online one? You should, provided your health hasn’t deteriorated during this period.

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In case you had purchased a term plan at, say, 40, five years ago and have a heart ailment now, you might not get a new plan.

“In such a case, it makes sense to hold on to the existing plan,” says Yashish Dahiya, co-founder and chief executive of PolicyBazaar.com.

Offline term plans are more expensive and these aren’t pushed by agents.

Typically, people buy policies with a lower sum assured, say Rs 20 lakh (Rs 2 million), when they are young.

When they have dependents, they might seek to increase the life cover significantly.

Such people can buy an online term plan, while paying lower premia.

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“The savings can be significant, even if you are purchasing an online plan of a higher sum assured after five years,” Dahiya says.

If someone aged 25 buys a life cover of Rs 1 crore (Rs 10 million) for a period of 30 years and a premium of Rs 12,000 and wants to shift after five years, the premium will be only Rs 8,000, provided there are no changes in his health conditions, habits, occupation risks, etc.

Offline plans offer the advantage of an intermediary -- an agent or an advisor.

These entities act as a one-stop shop for all customer queries, service requirements and policy updates.

In addition to being cheaper, online plans offer hassle-free purchase and faster application process.

Today, insurance companies also offer real-time customer service support and educate customers about product features and benefits, while they make purchases online.

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“Wherever there is good service from advisors and the assurance of ‘face-to-face’ interaction, it works as a big comfort factor for customers purchasing offline plans.

However, with e-commerce picking up exponentially, the online insurance sector, too, is seeing a paradigm shift and customers might shift to online plans that offer the same benefits as their offline counterparts, but at a much cheaper price.

With more customers realising the savings advantage with online plans, we expect more shifts,” says Rishi Piparaiya, director (marketing and direct sales), Aviva Life Insurance.

One should never surrender an old plan or allow it to lapse before securing a new one, cautions Deepak Yohannan, chief executive of MyInsuranceClub.com.

“The underwriting might be stronger or more stringent in online plans, as these are very cheap.

"So, companies might not want to take the risk and you might be rejected, even with minor, non-critical illnesses.

"So, policyholders should be careful that they first get a new plan before giving up the old one," he says.