Trying to answer another common question posed to us – “Is it safe to buy term insurance plans online?”
So the simple answer to this is YES. It is absolutely safe to buy an online term insurance plan
The doubt creeps into some minds because the plans are almost 50 – 70 percent cheaper than offline plans. When it becomes this cheap some people tend to disbelieve it and start having doubts. I don’t completely blame them!
Let us be very clear about this – there is no problem at all in buying an online term insurance plan. In fact, I would go to the extent to suggest that it is far safer to buy an online term insurance plan than going through the offline route.
Coming to the affordability factor – why is it 50-70 percent cheaper than an offline plan? Fundamentally it’s because the intermediary payouts which are being made are actually removed in the online term plans. In a traditional plan which is sold by an agent, there are commissions that run across the term of the plan and that means if you have taken a plan with a term of 25 years, commissions are paid out every year. But in an online term plan that’s not the case. That results in quite a substantial saving to the insurance company and the insurance company passes this savings to the customer.
There is a saving that comes in terms of the processing which is done online – the application form is online, and the entire transaction is online. So there is a saving again which is passed on to the customer. Again the feedback received by the insurance company is that since the customer is filling up the form himself in an online process, the levels of disclosure are far higher and far better than the agent-assisted process where the customer’s signature is taken in the blank application form and a lot of details are actually left blank by the customer which is then filled by the agent. The insurance companies are actually pretty happy with the level of correct disclosures because they are now being able to underwrite it better. When they are undertaking a risk, it is better to know more and more about the risks they are undertaking and so far the feedback has been extremely positive from the insurance companies.
All these factors put together actually help the insurance companies price it far lower than what they were doing earlier. Of course, competition also plays a role in this. Because of the competitive nature of the market, pricing is also being reduced to capture more market share.
Now coming to the safety factor – you want to measure the safety factor typically by the claims ratio which are being a claims ratio of insurance companies. Now when it comes to claims, insurance companies don’t differentiate between an offline and online term plan. If a claim is genuine, it is paid out, whether it is purchased online or it is purchased offline. Similarly, if a claim is not genuine and they find discrepancies in the application forms, even if it is in the offline plan they will object to it and they may be a problem in the claim process.
So to summarise – it is absolutely safe to buy an online term insurance plan – no problem at all. Just ensure that you are filling up the application yourself and inputting all the details correctly. If that is done no need to worry whether you buy it online or offline.
Hope that helps. Thank you.
