I have posted earlier about the 2 Cheapest Online Term Insurance Products, I-Term from Aegon Religare Life Insurance and I-Protect from ICICI Prudential Life Insurance. I have received many mails from Readers asking why these products are being offered so cheap, Premium being lesser than 50% of what is being Charged by LIC and other Insurance companies? What's the catch? How will we be assured that we are purchasing right product?
Me and my brother have personally opted for this policy after undergoing very stringent medical tests.After giving a deep thought, have come out with possible reasons.
Reasons why this policy is cheap
- Average life expectancy has increased in India and as per new actuaries data, mortality charges should decrease resulting in lower premium. LIC is following the mortality charges decade ago and has still not revised it. However the same is expected soon.
- Term insurance was a neglected market earlier and hence due to hi risk in limitation of law of averages insurance companies used to charge high premium. Now since insurance companies has seen demand in term insurance which is being opted by more people, in order to keep their product competitive they have to slash the premium.
- The medical test conducted in this type of policy is very stringent and this premium is only for healthy non smoking person unlike in other insurance products where there was not much premium difference in health and non healthy male, meaning healthy people used to subsidize the premium for non healthy people. To summarize you are getting discount for Sound Health and being a non smoker which is significantly reducing the risk of Life Insurance Companies..
- Online option results in reducing distribution costs which is being passed on to the customer.
- Since this product is available online only, it will be bought by educated class only, where mortality rates is much lower due to affordability of higher medical expenses which would further reduce the risk of Life insurance companies by reduction in claim ratio significantly. It would be not be wrong to say that this policy at the Lower Premium will be available only for Educated, Healthy, Niche class only.
To Conclude, you are being offered these premium rates for this Term Insurance as a Reward for being, healthy, aware, educated and non smoker. I will not comment anything about the services, but as far as policy terms is concerned, its same as being offered by other Insurance Companies, and there is no catch.
You should definitely opt for this policy, if at all you feel that there is a catch you can get the policy cancelled in the freelook period. However if you are still opting for a Normal Term Insurance policy from other Life Insurance Companies, you will be paying much higher premium, subsidizing the premium of Non Healthy, Smoker and probably less aware and uneducated people. Decision is yours.
