Nov 30, 2010

Life Insurance Online Term Plans: Review


Term life insurance is finally getting a push. The initiative was taken by AEGON Religare to provide a remedy for people suffering from K.I.L.B (Kum Insurance Lene ki Bimaari); the baton was subsequently picked up by ICICI Prudential Life Insurance and now gradually other life insurance companies are trying to follow suit. In the month of October and November 2010 itself, three life insurance companies (Kotak, MetLife and Future Generali) have entered the fray to sell online life insurance term plans through the internet. So here we try to review these Online Term Life Insurance Plans and answer the common questions you have about them:

Everything you want to know about Online Term Life Insurance Plans:

1. What are Online Term Life Insurance Plans?
These are pure protection life insurance policies available for purchase only on the net. These Online Term Plans provide you with instant life insurance cover with simple online application process.


2. Which Online Term Plans are available in the market as of now?
As on date (26 Nov 2010) following Online Term Plans are available in the market:

a. AEGON Religare iTerm plan
b. ICICI Pru iProtect
c. Kotak Life e-term and Kotak e-Preferred Term
d. MetLife Met Protect
e. Future Generali Smart Life

Note: Kotak Life Online Term Plan has two variants: Kotak e-term for sum assured up to Rs 24.99 lakh and Kotak e-Preferred Term for sum assured of Rs 25 lakh and above, all other terms & conditions remaining the same.

ICICI Prudential Life Insurance also offers two variants of iProtect: Option 2 of ICICI Pru iProtect offers ‘Accidental death benefit’ rider which is equal to sum assured (subject to a maximum of Rs 50 lakh).


3. Why are Online Term Plans cheaper than conventional term plans?
Due to absence of agents / distributor from the picture, no commission needs to be paid and that results in direct savings which is passed on to the customer in the form of lower premiums.


4. Is the buying entirely online?
No, it’s not. First, if required one has to go through a medical test. Second, documents have to be handed over to the company representative who might never come to collect it.


5. What is the process of buying Online Term Plans?
It consists of two parts: Online and Offline
Online Process: First decide about the sum assured and term of the policy; fill up the online proposal form; make the payment online

Notes:
a. Some Online Term Plans doesn’t support Mozilla Firefox, you will require Internet Explorer

b. Know your correct weight, height, previous major illnesses, family medical history and details of all previous life insurance policies before you start the online process

c. For making online payment, you’ll have to use your own credit card or internet banking account. For example, terms and conditions of ICICI Prudential Life Insurance iProtect specifically mention that “Use of credit card or internet banking account of persons other than the proposer’s will lead to decline of proposal/payment”. I presume that all other online term plans also impose the same restriction.


Offline Process: Go for medical tests if required; hand over the documents such as age and income proof to the company representative.


6. What are the various payment options available in Online Term Insurance Plans?
Usually two modes of online payment are allowed: Credit cards and Net banking except in case of MetLife India Insurance. MetLife Met Protect doesn’t allow internet banking account but allows payment via Credit card/Debit card, Cheque and MetLife’s IVRS (Interactive Voice Response System).


7. What are the major benefits of buying these Online Term Plans?
The one and only benefit is lower cost than offline term plans.


8. What are the other major differences with offline life insurance term plans?
No agents available to guide you; non-availability of riders; available only in selected cities; need to be net savvy; only online payment options.


9. Which life insurance plan is the cheapest among the 5 Online Term Plans?
In case of a 30 year non-smoking male looking for term plan for 25 years, e-Term / e-Preferred Term from Kotak Life Insurance is cheapest up to a sum assured of Rs 60 lakh, beyond which iProtect from ICICI Prudential Life Insurance becomes the cheapest Online Term Plan. However, the difference in premium is not significant except for a policy amount of Rs 25 lakh and Rs 2 Crore.


10. Can an NRI buy these Online Term Plans?
No, these Online Term Plans are meant for resident individuals only.


11. Are these Online Term Insurance Plans similar in all respects other than premium?
No, these Online Term Plans also differ in respect of minimum/maximum duration, minimum /maximum sum assured, maximum age at maturity, premium paying frequency, availability of riders etc.

Furthermore, unlike other Online Term Plans, ICICI Prudential Life Insurance iProtect also provides you option to buy ‘Accidental Death Benefit’ Rider on payment of additional premium. Kotak Life e-term offers flexibility to Step-up and Step-down your insurance cover in future based on your needs. Let’s compare them on various parameters:

Online Term Plans Features: Comparative Chart



12. Is there any limitation of Online Term Plans?
Inconvenience involved in buying these plans. Read about the bad customer experiences and the difficulties being encountered by people while buying the ICICI Pru iProtect online term plan.


13. What if I live in a city not included in the plan coverage?
In case your city is not covered, you’re not allowed to purchase an Online Term Plan. However, the ICICI Prudential Life Insurance iProtect provides you an option to buy it in offline mode i.e., through agents/brokers in which case you have to pay a slightly higher premium which should be approximately in the range of Rs 100—500. Still, it is much lower than the conventional offline term plans.


14. Is there any limitation as to the maximum sum assured?
No, there is no such restriction except in case of Future Generali Smart Life. The maximum coverage allowed under all the other four online term insurance plans is decided by the respective company on case-to-case basis depending upon your income/age/lifestyle/medical history etc. which is subject to underwriting.


15. Should I buy these Online Term Plans?
No, in view of bad customer experiences, it is better to follow a wait and watch policy. If you’re in a hurry consider the cheaper options among the conventional offline plans.


16. What if still want to buy one of these Online Term Plans? Are there any pitfalls?
Before rushing to buying into online term plans, understand the following points:

i. If you are buying ICICI Pru iProtect don’t go for Accidental Death benefit rider. It is always preferable to buy a separate Personal Accident Policy which will also cover you for Permanent and Temporary disability benefits.

ii. If you would like to buy AEGON Religare iTerm policy, know that claim settlement record of the company is very poor. Furthermore, as per the iTerm policy conditions, at the time of making a claim, in addition to a death certificate claimant is also required to provide ‘Certificate of Doctor/Medical Officer certifying the cause of death’. It seems to be a ridiculous condition and I suspect the intention is only to raise spurious objections to delay the settlement of claim or reject it out rightly. So Beware!!!

iii. If you buy Kotak e-term or Kotak e-Preferred Term Plan, ensure that you select annual premium payment option instead of monthly/quarterly/half yearly payment option and if going for MetLife Met Protect avoid single premium payment option.

iv. If you’re already having a life insurance Term Plan, please don’t discontinue it to buy the cheaper online version. You can surely add to your existing policy in case you need to increase your risk coverage.

v. Finally, please don’t get tempted to hide any material facts…disclose correct income, lifestyle and health related particulars. Also ensure that you declare all the previous life insurance policies otherwise you might face problem at the time of the claim.


17. Can I claim income tax deduction under Section 80C as payment is neither made in cash nor through a cheque?
Yes, you can definitely claim tax deduction under Section 80C even though payment is made online through internet bank account or credit/debit card.


18. Whether the premium calculated as per the Online Premium Calculators shows the total cost to be borne by the applicant? Or, are there any other charges involved?
Premium shown as per the online term plans brochures/calculators is exclusive of service tax and education cess except in case of Kotak Life e-Term and e-Preferred Term. To arrive at the total cost, you need to add 10.3% to the premium calculated as per the online premium calculators. For example, if the premium shown by the online calculator is, say, Rs 3,900, you’ll have to pay an extra amount of Rs 402 as service tax thereby raising the total cost to Rs 4302.

Please also note down that these rates are standard rates applicable to non-smoking healthy male and you might be asked to pay more depending upon your lifestyle/health conditions.


19. Should I buy one policy or split the coverage between two policies?
I’ve discussed quite elaborately that it is always prudent to buy a single term policy instead of splitting your total coverage and buying multiple term insurance policies as it involves various hassles in addition to extra cost.

But, it’s ok, if you want to go for splitting your total risk coverage by buying two different plans from two different insurance companies so as to better manage your risk due to poor settlement record of various life insurance companies.

However, as it involves additional cost, it is always prudent to take an informed decision by calculating the ‘Cost of Splitting’ your sum assured. For instance, continuing the above mentioned example of a 30-year old non-smoking male, if instead of buying a cover of, say, Rs 60 lakh from ICICI he buys 30 lakh cover from ICICI and balance 30 lakh from iTerm, he’ll be required to pay an extra sum of Rs. 2,580 every year excluding service tax. So, the total cost of splitting comes to Rs 71,143(2,580*1.103*25).


20. How should I choose the most suitable term plan in terms of sum assured and premium? How do we make a premium comparison between these Online Term Plans?
There’s still immense scope for planning, even if you’ve already decided your risk coverage. Ok, let’s first calculate the premium (exclusive of service tax) on various online term plans for varying sum assured in case of an individual, say, a 30year old healthy non-smoking male who would like to buy a term plan for 25 years.

Here’s the Premium Comparison Table:



First, let’s exclude Future Generali Smart Life from the comparison because premium rates are too high. Therefore, we are now left with four online term plans to compare.

Second, another interesting point to note is that for a sum assured up to 24 lakh, Met Protect is not available and among the rest three, Kotak e- Term is slightly cheaper than the ICICI Pru iProtect and Aegon Religare’s iTerm. For a term plan insurance coverage anywhere between 25 lakh and 49 lakh, we observe that iTerm is very costly as compared to other three online term plans so it is better to avoid it. For sum assured of 50 lakh and more, all the four term plans are almost at par except iTerm.

Finally, here’s a little secret about these term plans:

Term plans offer you discount/rebate after you cross a particular threshold. This threshold limit is 25 lakh in case of iProtect and e-term and Rs 50 lakh for iTerm and Met Protect.

If you want to buy ICICI Pru iProtect, avoid buying a cover for 20/25 lakh, instead go straight for Rs 30 lakh cover. In fact it will be outright foolish to buy coverage of Rs 25 lakh from iProtect because by opting for Rs 30 lakh cover, you get additional 5 lakh coverage absolutely free at no additional cost.

Similarly, in case of kotak e-term, instead of buying a cover between 20 and 24 lakh, you will be better off by opting for a sum assured of Rs. 25 lakh, because you get additional sum assured of Rs. 5 lakh by paying just Rs 100.

Applying the same logic to Aegon Religare iTerm where the threshold limit for discount starts from 50 lakh onwards, it will be another height of financial stupidity if somebody go for a sum assured of anywhere between 30 lakh to 49 lakh ; e.g., in the above example by making a jump from 30L to 50L, an individual can buy an additional coverage of Rs 20 lakh at an extra amount of just Rs 440 or somebody looking for a 35 lakh sum assured can get an additional sum assured of Rs 20 lakh for Rs 140 (excluding service tax).


Also see:

1. Review of highest NAV Guarantee plans
2. Best ELSS Funds
3. Life Insurance Term Plans: FAQs
4. Section 80C Tax Savings – 10 Smart Tips

45 comments:

  1. Thanks for the comprehensive review..just felt a review on online policies was long overdue.

    ReplyDelete
  2. Dear Dr. Fisher,

    I am really confused whether to go for the conventional LIC pure term plan or for the ICICI iProtect as the difference in rates for a 1 crore cover is quite significant. So far I dont have any insurance but I really need to take one as i'm 29 years old and premiums will only get costlier in the future. Please suggest a solution for this.

    Sunnydoc

    ReplyDelete
    Replies
    1. you should think about kotak e-term plan as it is the most cheapest plan in the market.And you also mentioned that premium will get costlier as age increases.

      Delete
  3. Sunnydoc,

    What makes you think that term insurance premium rates will go up in future?

    ReplyDelete
  4. Dear Mr. Fisher,

    I mean to say that the cost of paying premiums will go up as I grow older, so it would be better to take insurance now rather than when I turn 35.

    Sunnydoc

    ReplyDelete
  5. Sunnydoc,

    That’s ok, but who’s asking you to wait for another 6 years?

    ReplyDelete
  6. Dear Mr. Fisher,

    Exactly my point.. I wish to opt for insurance right away!.. Just confused as to which one to go for, therefore my first question.. Please suggest.. should i go for a conventional LIC pure term plan which costs a lot for a cover of one crore, or should I go for an online plan instead?

    Sunnydoc

    ReplyDelete
  7. Sir,thanks for comprehensive article.I have opted ICICI iProtect.I came to know that it only accept payment through credit card and only ICICI net banking.
    I have activated HDFC net banking.Can I pay premium through it?

    ReplyDelete
  8. Sunnydoc,

    Why are you comparing LIC term plan with online term plans? I’ve given enough guidelines to help you make a decision. Anyway, to clarify further here’s your options:

    1. Wait for a few months till there is more clarity about customer service issues.

    2. Take a chance and either go for ICICI Prudential iProtect or Kotak e-Preferred Term Plan.

    3. Try the offline version of ICICI Pru iProtect where the premium is slightly higher than online iProtect. Here you’ll have to route your application through an agent.

    4. Find a cheap offline conventional term plan. For this first compare premium of all the available term plans including that from ICICI Prudential and Kotak.

    I hope now you’ll be able to make the right decision.


    Vinay,

    Yes, you should be able to…i don’t think there’s going to be any problem.

    ReplyDelete
  9. Dear Mr. Fisher,

    Thanks, my confusion has been laid to rest. I'll wait for a few months longer.

    Sunnydoc

    ReplyDelete
  10. Hi Fisher,
    splendid efforts. appreciate all your work in guiding all of us in right direction.

    ReplyDelete
  11. How is AVIVA Life Shield Advantage plan for return of premium?
    I am totaly confused to read all these. I understood one benefit of such i.. plan but anyhow drawback which i can sense is, CLAIM SATTLEMENT.. that is the beggest worry for insurer.Died person would have think his/her family will be in comfert after these term plan BUT question is that ARE THESE COMPANY ISSUING i. policy providing online settlement like scan and post required doc,acknowlege to nominee etc. process?

    I would say. TENSION JINDAGI KE SATH BHI AND JINGDAI KE BAD BHI..

    ReplyDelete
  12. Rajesh,

    Pure term insurance policy is always preferably to term insurance plan with return of premium (ROP).

    Yes, settlement process is always offline. How does it matter whether the claim settlement is online or offline? Why do think online process of claim settlement is going to be any better? Do you think it is going to improve the claim settlement ratio of life insurance companies in India?

    ReplyDelete
  13. Dear Fisher,


    Thanks for this article ....Great job .....Keep going and guide us through amazing articles like this .....

    Regards,

    Dhaval Trivedi.

    ReplyDelete
  14. hi Fisher,
    you are the best financial advisor i have found so far among all on the net and my friends. Keep up the good job. Kudos.
    Vijay

    ReplyDelete
  15. Hi Fisher,
    Greetings! Great job must say. Your blogs are really enlightening and knowledgeable.
    I have 2 doubts on the above. One, why do you mention not to go in for single premium term policies as against annual premium ones? Single premiums turn out to be much cheaper when divided by number of years insured.
    Second, could you kindly review the LIC term plan - Amulya Jeevan along with the private players? LIC because they have the least claim rejection numbers. The trust factor is more with LIC i feel..

    Thanks,
    Hardick

    ReplyDelete
  16. Hi Fisher,
    Greetings! Great job.. your blogs are really knowledgeable.
    I have 2 doubts on the above-
    Firstly, why do you say that annual premium term policies are preferred over single premium term plans? I mean the single premium ones turn out to be much cheaper when divided by the number of years insured.
    Secondly,there is no mention or comparison of the LIC Amulya Jeevan Term policy. This policy also offers single premium option. Also the records show that LIC has the least claim rejections. I guess the trust factor is more with LIC as against the private players..

    Thanks,
    Hardick

    ReplyDelete
  17. Hardick,

    Regular premium is usually better than a single premium… detailed arguments will be discussed in a separate post.

    As far as review of LIC Amulya Jeevan Term Policy is concerned, I can’t promise anything at the moment; keeping in view the interest of the readers, if there arises any need, I might review it in future.

    ReplyDelete
  18. I am planning to buy Amulaya Jivan (25 k, 25 years, 8200 yearly premium). Please review it.

    ReplyDelete
  19. Hi Fisher,

    I have taken Aegon Religare iTerm plan for 25 yeras and SA 25 lakhs.

    I have seen your views and now in confusion whether to keep this plan or not.

    Also you mentioned to declare all the previous life insurance policies. I have taken some life isurance policies from LIC but not term policies. Do I have to declare those policies too.


    Regards
    Amit



    Regards
    Amit

    ReplyDelete
  20. Amit,

    Sorry, I can’t make the decision on your behalf; you’ve to decide on your own; further, you need to declare all your existing life insurance policies including ULIPs, whole life policies and endowment plans.

    ReplyDelete
  21. Hi Fisher,

    I am a regular reader of your articles and really happy to see you back after a break.

    My question is - what is you opinion on LIC pension plus.
    I am 26 and really not sure how much pension would i need every month after about 32 years... should i go for a pension plan or is there any other instrument where in i can invest to get good returns when i am old.
    My current investments are:-
    70k in PPF every year
    15k in LIC money back policy (20 years)
    20k in HDFC taxsaver mutual fund
    3k SIP in HDFC money growth fund


    Regards,
    Amay

    ReplyDelete
  22. Amay,

    Pension plans of life insurance companies are the worst kind of financial product you should invest in to manage your retirement funds. There are many good investment options including diversified equity funds, balanced funds, debt funds, PPF, EPF and Post office saving schemes.

    ReplyDelete
  23. Hello Fisher

    I have a ageon reliagre iterm plan for rs 25 L...i have not paid renewed the policy and it shall expire in Feb...i am attracted towards Kotak e-preferred plan..as it is cheap...and i could not find any difference between therse two. However...ageon claims that it covers all form of death including accidental and due to Terrorist attack...is kotak not covering this. pls guide and i shall buy/renew the policy on your gudiance

    ReplyDelete
  24. Unlike general insurance policies and riders attached to the life insurance policies, all life insurance policies including Term Plans automatically covers DEATH due to any reason whatsoever–including accidental death and / or death by a terrorist strike—except suicide in the first year of policy. Anyway, before buying any insurance plan, you should always carefully read the terms and conditions including exclusions.

    Hope it helps!

    ReplyDelete
  25. Hello Fisher
    Thanx for the prompt response....In that case should i renew ageon iterm(rs 25 L) or buy new kotak e-term as in that i will be getting additional cover of rs 10 L (rs 35 L) in same premium amt of aegon..pls suggest

    ReplyDelete
  26. Kashish,

    This is something you need to decide on your own.

    ReplyDelete
  27. Hi Fisher,

    Is there any reason why online term plans are not for NRIs? Most of the insurance companies allow NRIs to take insurance during their visit to India with appropriates salary proof and address proof. So as long as these are there even online should be allowed for NRIs?

    Also what about India born US citizens living in India?

    Thanks

    ReplyDelete
  28. Kamlesh,

    Sorry, can't say anything about it.

    ReplyDelete
  29. Hi Mr. Fisher,

    In case of Term plan for a 32 yrs old for a term of 30 yrs for a Sum Assured of 60 lacs out of ICICI iProtect and LIC Amulya Jeevan, which policy would you suggest keping mind the features of both plan in case of death.

    Thanks

    Vikram

    ReplyDelete
  30. It is mentioned that online term plans are available in select cities only. Whether it is a condition to live in the same city or a city covered under eterm plans for whole life. In other after getting online insurance if one moves to a city which is not covered for on line option, what is the impact and status of onine policy?

    ReplyDelete
  31. Hi Fisher,
    I have a doubt regarding Term insurance plans. Do these plans also cover death by accident or we should buy some other plan to cover accidental death.
    regards!
    Sunil

    ReplyDelete
  32. I had a bad experience with ICICI Pru iProtect too. I did my medical, submitted my docs and did everything on time, but they just delayed the processing and one fine day called me up saying they can't offer the policy and refunded my credit card with the premium. I think there was a resource crunch for handling the application. Later I escalated the bad experience on their grievance website. In about a month someone from ICICI Pru called up asking me whether I wanted to go ahead with the policy - they had cleared up the mess. I said No Thanks.

    I then went for Metlife MetProtect. I did my online form filling, medicals at a hospital of my choice and submitted docs to their rep. I got my policy docs in 20 days flat! I recommended it to my office colleagues who too then applied. They got their policies within a month from applying. Good experience for MetProtect.

    ReplyDelete
  33. Hi Fisher, Quite interesting Analysis and helped me take an important decision to secure my family. Keep going. Rgds,

    ReplyDelete
  34. I am having Kotak preferred Term plan for 50 Lacs (for 30 years). I am paying half yearly premium 7846 (yearly 15,692). Now in online plans premium was very lesser. which one will be the best option ?

    1.) close the existing one and open the new kotak preferred term plan via th agent (to avail riders if any)
    2.)close the existing one and open online kotak eterm plan

    ReplyDelete
  35. Sandeep KumarMay 01, 2011

    I want to share my BAD EXPERIENCE WITH KOTAK, which I got while I was trying to get information about kotak e-preferred plan.

    For kotak e-preferred plan - step-up option, I had following queires:
    a) On 1st, 3rd, 5th policy anniversary, how premium will be calculated i.e. will factors like smoking, health condition, re-medical check-ups, economy inflation etc be considered? Or only 3% of basic premium be increased on 1st, 3rd ,5th year and birth of child?
    b) Is there any expiry of step-up option. By expiry means that will after 45 yrs of age will sum assured will be increased premium due to step-up option or original premium of 25 lakhs?

    Same information I had contacted with kotak customer care via mail and phone, but did not get replied since 2 weeks. Most horrible experience was with customer contact number 1800-209-8800, where I had waited for almost 1.30 hrs, but even after that also I was not connected to customer care!!

    If this is before product sale condition, then what should be after product sale?

    ReplyDelete
  36. AnonymousMay 14, 2011

    Hi,
    what do you think about
    Max New York Life - Platinum Protect

    ReplyDelete
  37. AnonymousMay 19, 2011

    Just bought Metprotect. Got policy in 15 working days. Good service.

    ReplyDelete
  38. AnonymousJune 13, 2011

    Fisher,

    i tried buying policy online from Aegon but i was not happy with their half online and half offline process.. i handed up asking my money back. it is better to walk in SBI life and buy a smart shield as i found the premium very similar and i get to buy riders.

    Regards,
    Pankaj Sharma 9370347693

    ReplyDelete
  39. AnonymousJune 16, 2011

    Hi Fisher...
    A Great Job...to remove confusions..
    We here some friends decide to take TERM Plan and discussed with rep. of Kotak & SBI...they told..if u will take on-line..you may not provide proper information and may problem in cas eof claim...

    I dont understand why Rep. are pushing high for off-line..are they getting handsome commision....

    We have decided for Kotal E-Plan....looks suitable with good reputaion ..
    is is fine..
    swadesh Bhopal

    ReplyDelete
  40. AnonymousJune 26, 2011

    Hi Fisher,
    It has been a "few months" since you wrote this excellent piece of advice and facts. Would be interested to know if you have any updates on any of these online term plans - their services or settlement ratios....
    Do you think the time is ripe for online term plans to take off in India?

    -regards
    Manoj

    ReplyDelete
  41. hi Fisher,

    Please guide as to whether these online life insurance policies have some maturity value as well or they pay only in case of death

    ReplyDelete
  42. Hello,

    I completely understand that term plans are better than any other plans, if one is looking purely from a coverage point of view.

    My question is - I am planning to buy a term plan for 30 lakhs. I want to know which company offers a hassle-free, quick and less cumbersome claim in case of one's death. I am confused between LIC and other private insurers. Please suggest.

    ReplyDelete
  43. I purchased online Kotak Preferred e-term, it was very easy. The agent was pushing for offline, but rates were high. I decided to go for online, it is very very cost effective. But my area was outside their service area (Kelambakkam is not included in Chennai area), so I went to Egmore office and submitted documents on my own. It is good, monthly online pay and we can see details. Don't know about how fast it will settle claims in case of unfortunate thing.

    Pramod, Chennai

    ReplyDelete
  44. Hi Fisher,
    As of today HDFC has also launched online term plan.
    Do you still think we shall not buy online term plan?
    Can you suggest between ICICI,HDFC,AVIVA and Aegon which term plan shall i choose.
    My age 27 years, i want 50L min coverage.
    thanks

    ReplyDelete

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