Buying term insurance? Tips to save money

The online availability of term plan has made it easy to buy it with ease as well as save on premium paid.

Internet facilities, malls, FMCG goods, electronic consumables and multiplexes have changed the way we live. With increased exposure to outside markets, the common viewpoint related with investments has also evolved. Nowadays, the young generation is also moving towards exploring different aspects of investment such as SIP, mutual funds, etc. While all these investment opportunities are good options, the term plan also has become quite popular which is basically a protection plan providing no returns.

The online availability of term plan has made it easy for young and older generations to buy it with ease.

Availability of term plan has brought a smile on the faces of those who are unable to afford costly insurance plans for their safety and security. The emergence of term plans allows customers to reap benefits of an insurance policy at a relatively low cost. However, it is different from basic investment plan as it does provide a sum assured amount to your nominee or beneficiary as per stated in the document only in case of your death, instead of returns.

Term plans are the cheapest form of insurance as it provides you coverage of say Rs 80 lakh for around Rs 4,000 depending on your age. Further, the cost of buying reduces further if you buy it through an online medium. Numerous people replace their existing costly term plans for the online substitutes.

But is it really worth going for online term plans?

Why online term plans are cheaper?

There are many attributes which make an online term plan cheaper as compared to buying them offline, such as:

• Distribution cost: On buying online term scheme, there is no need to pay any kind of commissions to the agents which saves money.
• Less operational cost: As there is minimal paperwork in an online term plan it directly has an effect on the overall cost for customers.

When should you switch?

It is a common question which customers usually ask. Experts suggest switching costly term plan with a cheap alternative as early as possible. If you switch at an early age then you will be able to reap many additional benefits from it. This is because the health risks are very low at a young age and this forms one of the key criteria bases which your premium term is decided.

If you switch the term plan or buy a new one at a later stage of your life then the cost of premium would increase drastically.

Advantages of online term plans

Apart from the major benefit of a term plan in the form of providing financial stability to your family when you are not around to look after them, there are few additional benefits of this plan, such as:

• You can buy it for a particular financial responsibility such as payment of the loan, post death
• Anytime access to plan related features, terms and conditions ensuring absolute transparency
• There are many term schemes which allow you to convert them into cash value for meeting any requirement
• Easier to track the performance record of the company through social discussion

Disadvantages

• There are very few disadvantages of an online term plan, such as:
• It provides coverage for a limited period of time only
• The premium will be high for an old age person
• Lack of proper guidance may result in buying of wrong term plan

Now, that you know about the process and benefits of switching your existing plan for a better online term plan, it should not be much of a task for you to go about the process if you intend doing that. To further justify your decision, you can compare term plans easily through an online insurance web aggregator for better assistance. If you have already planned to switch your plan then compare and make the switch at the earliest possible for better savings on the premium you pay.

Illustration: Uttam Ghosh/Rediff.com

Naval Goel is CEO and Founder, PolicyX