Are Online Term Insurance Plans Cheap?

With the advancement in technology, buying insurance is easy. As Internet dispersion grows manifold in India and people becoming increasingly comfortable with transacting online, we are witnessing a massive online buying and selling of products and services in the country. Online Buying of insurance has propelled the customer to make informed buying decisions.

Also, as there are different offers available at varying price points, all at the same place, on a single website to choose from. Before going further, let’s explain a bit about such plans. Term Plans are the plans for risk coverage, and the nominee is financially indemnified after the death of the insured during the policy term. There is zero maturity amount, and the insured can get tax benefits from such plans.

So YES, Online Term Plans are cheaper as compared to Offline Term Plans.

Almost all life insurance companies in india are offering online term insurance plans on their websites as these are the plans which are being sold the most as they are cheaper compared to an offline product. But why are they considered cheaper than offline plans being sold by companies’ agents, brokers or other distribution channels?

Multiple factors are determining their cost. Let’s have a look:

1. Administration Costs

Trying to sell insurance plans from an office is a costly affair as there is a cost of paperwork, selling and marketing costs apart from other administrative expenses. All these become part of the final cost of the policy and are included in the premium to be collected from the customer. Online term insurance selling, on the other hand, eliminates all such costs. The cost of maintaining and updating the website is minimal even as the customers can select the plan as per their needs and do all their transactions online. In simple words, there is an ease of doing business from the customer’s perspective and for the insurance company as well, it is a low-cost high-return venture.

2. No Commissions

All insurance companies have to hire agents/brokers to sell their products and pay commissions for that. These commissions form a substantial part of the premium that is being charged from the customers and is one of the major factors for high premiums during offline sales. When it comes to selling of term insurance plans over the internet, these commissions are completely eliminated and such reduction in cost works in the customers favour. The insurance companies find no problem in passing on such benefits to customers as it also becomes a highly attractive selling point.

3. Less Risk

This is yet another factor why online term insurance plans are cheaper. One of the assumptions that insurance companies make is that the customers who are Compare and Buying Insurance Online are more educated, have access to better health-care facilities and are more health conscious and informed than those who don’t have internet access. This would mean less risk for the insurance providers while at the same time getting much more detailed information about the buyer’s background. Such information is not available when dealing through an agent due to various factors like time constraints, buyer-agent trust that leads to incomplete forms. This is more like profiling potential clients based on availability and usage of internet. It is not a thumb rule, but an important consideration when selling term plans.

4. Simple Plans

One of the major factors leading to low cost of online term insurance plans is that these are pretty simple plans, providing only the death benefits. They are easy to understand for a person from a non-insurance background as well.

The future of insurance is online. With the penetration of internet getting deeper in the country, more and more consumers are going to opt for online term insurance policies that are not only light on their pocket, but also fulfil the basic need of being covered for death. Such plans are here to stay and will form a significant part of the market.

If you haven’t got an online Term Plan yet, go ahead and save on the premium cost.

Harjot Singh Narula

Harjot Narula is founder and CEO of ComparePolicy.com, an IRDAI approved insurance web aggregator focussed on selling online insurance for companies. Harjot has more than a decade of experience in software development and has also spent 5 years in US working for the mortgage and risk management industry.

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