Categorized | Term Insurance

how does an online term plan differ from a traditional term plan

While online Term plan is similar to traditional term plan in terms of product features, there is a fundamental difference between the two. In an online term plan, there is no intermediary or agent involved whereas a traditional term plan is purchased through an intermediary or an insurance agent.

Here, we compare the implications of buying term plan online against traditional term plan.

Claims Procedure Remain the Same

There is a general apprehension that Claim settlement would be difficult if you buy term plans online instead of buying it through an agent. Well, this is a false notion as the procedure to file a claim remains exactly identical in both the cases. The claim settlement is done as per the norms set by the Insurance Regulatory Development Authority (IRDA).The documentation that you are required to produce for getting a claim processed is same for a traditional and an online Term Insurance plan.

Premium Costs for an Online Term would be lower


As an online term plan does not involve any agent, the commission that is saved is passed on to the customer. As a result, buying a term plan online comes out to be cheaper in comparison to a traditional term plan  Besides, the Risk Premium that insurers attach to an online customer is lower than what is assigned to an individual who buys through an agent. The fundamental reason why an online customer is considered to carry lower risk is because such a customer is generally educated and is more conscious about medical conditions as compared to an uneducated customer. Being better informed about medical conditions, he is likely to seek medical attention timely which cuts down the possibility of an untimely death.
 
Higher Probability of an Online Term Plan Lapsing

While you buy a term life insurance Policy online there is certainly money to be saved in terms of premium amount, but keep in mind that you will have to be more diligent than somebody who has brought a traditional term plan through an agent. An agent is likely to keep pushing his client every time when the premium is due, but in case of an online purchase you will have to take care of your premium dues on your own. There is obviously a Grace Period of 15 to 30 days that you get, but make sure you do the needful within that period else you run the risk of seeing your policy lapsed. In such a scenario you would be required to buy a fresh term plan which unfortunately will carry a higher premium tag.

A better way to avoid such a situation is to give an ECS mandate to the bank which will lead to automatic deduction of the premium whenever it gets due. Additionally, you may set a calendar item on your e-mail system or a reminder on your mobile which will help you ensure there is adequate bank balance.