Insurance & Life: Online Term Policies

Why online Term Policies are available at very low premium?

The profile of policy holders opting for online policies is different from the
general public. This will ensure lower death rate among these elite clients and so insurance companies can offer lower rates. There are many reasons for this low premium in online term plans. The main reasons are given below:

Net savvy customers only will opt for online term policies
Since there is no agent involved in the sale of an online term plan, the insurance company saves on commission expenses. If the policy is sold through an agent, in addition to the commission, there are other administrative expenses like sales incentives, manager’s salary etc. which also will add to the cost of new business. In Online term plans, all these expenses are saved.

Strict medical underwriting and loading of premium
Since only educated prospects are applying for online policies, there will be more disclosures regarding the actual health condition at the time of taking the policy. Based on the medical reports and such disclosures the company may load the premium, depending on the health condition of the prospect. In some cases, you can expect the loading to be equal or more than the normal premium, depending on the extra risk of the prospect, as estimated by the underwriters of the insurance company.

Though the premium quoted in the website may appear very low, in most cases, there are loading of premium depending of the health condition. The premium quoted in the website is that for a healthy person with no adverse medical history.

Precautions while purchasing term policy
Insurance is based on the concept of ‘Utmost Good faith’. You are supposed to disclose your health/habits etc correctly while applying for an insurance policy. For example, if you are diabetic, or having hypertension don’t forget to mention these in the proposal form. Similarly, if you are a smoker or consume alcohol, mention these in the proposal. The insurance company may charge a higher premium depending on your health/habits. It is called loading.

This prompt disclosure is important to avoid confusion later. If you are hiding these details at the proposal stage, there is a possibility of claim rejection in future. Be 100% honest while purchasing the policy.