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Monday, August 26, 2013

5 things to know about online term insurance

Though they have become popular in the past two years, many customers have misconceptions about these insurance plans, says Babar Zaidi

1 No difference in client servicing 

The online customer receives the same quality of service from the insurance company as any other client. The difference is only in the channel through which the policy has been bought. Agents try and paint a different picture because they lose business when a customer buys directly from the company. When a claim is processed, there is no differentiation between a policy bought online and one purchased through an agent. Besides, all insurance companies have to comply with the rules laid down by the insurance regulator, Irda. If a company is found lacking in service or tries to wriggle out of a commitment, the customer can file a complaint with Irda. 

2 Low premiums don't make them unreliable 

The low premium rates of online term plans make many people apprehensive. The premium of an online term plan is low because of two basic factors. One, there is no intermediary, so the agent's commission is passed on to the customer. More importantly , the online buyer is perceived as a low-risk customer by insurers. He is educated , earns reasonably well, is concerned about protection and is likely to have health insurance as well. In case of a medical emergency, he may be able to quickly reach a hospital and access specialised medical treatment. All these factors combine to lower the risk and, therefore, reduce the premium. 

3 Premium is indicative and can change 

The online quote is based on the assumption that you carry the normal risk in terms of health, family's medical history and occupation. When you submit your details and pay the premium, the cover is subject to medical tests. If the tests show that you are suffering from a medical condition or are exposed to a specific risk at work, the premium quoted is likely to rise. If the customer declines to pay the higher premium , his money will be refunded after deducting the expenses incurred on medical check-up . 

4 Don't let the policy lapse 

If purchasing an online term plan is one of the smartest money moves, the dumbest is to let it lapse. With no agent running after you for the renewal premium, there is a good chance that the customer will forget to renew his insurance. Once the policy lapses, you will have to buy afresh at a much higher premium. Companies offer a grace period of 15-30 days for late payment of premium . Give an ECS mandate to your bank, so that the premium automatically gets paid when it is due. It's a good idea to set an alert in your cell phone or computer. 

5 Don't hide facts in the application 

If you smoke or chew gutka, your premium will be roughly 25-30 % higher than that of a non-smoker , but don't try to hide the fact in your application. If the insurer finds out that a policyholder concealed information that affected the risk to his life, the claim will be rejected. Every year, about 2% of the claims received by life insurance firms end up in the trash can. Your insurance policy is the bulwark of your financial plan. Don't let it be rejected just to save a few hundred rupees as premium.

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