Term insurance has evolved as an investment to protection product

Traditionally, life insurance products in India had insurance elements but were bought by the consumers mostly as an investment product. The recent times have seen a shift from investment to protection in the life insurance category.

Protection products offer a high amount of coverage vis a vis premium paid for your protection against uncertainties of life. For example, a 30-years-old individual would get a term insurance cover of Rs 1 crore for paying only Rs 1000 per month. Insurance plans are becoming more consumer-friendly and pocket-friendly.

Policybazaar was the first company to bring these plans to the consumers. New-age term insurance covers death, disease, and disability. Protection plans were relatively expensive ten years ago when Policybazaar had started. In the last 10 years, these plans have become very cheap.

Term insurance plans have also become very modular. They not only have death benefits but also life benefits. Term insurance plans are extending protection against critical illness and accidents apart from death. These plans have different premium payment options like regular payment, you can pay at one go or for a specific number of years depending on your payment ability and life stage. Apart from pure term life insurance plans, Term Plans with Return on Premium (TROP) are also available in which the entire premium amount is returned to the policyholder in case he survives the policy term.

Still, there is a wide insurance gap in India as less than 10% of taxpayers in India have term insurance. An IndiaSpend study in 2019 revealed that over 75% of the Indian population lack any form of life insurance.

Historically, in India, there was a joint family system, and family members used to help financially in case of unfortunate incidents. However, over the years, there has been a move from the joint to the nuclear family system. This gap effectively measures what family would require to live in the absence of the breadwinner. The industry is also encouraging the government to give a tax nudge to protection products.

If you are below 40 years, the amount of sum assured should be 20 times your salary. If you are at the age of 40-50 years, the sum assured should be 10-15 times your salary.

Term insurance is increasingly becoming part of prudent financial planning among consumers. Indian consumers are value-conscious and term insurance is a value product where you get a large amount of protection on investing a small amount. Gradually, consumers are realizing the value of a term cover.

The first term insurance plan was launched by Aegon in 2009 and Policybazaar carried that product since inception. The company has spent over Rs 1,000 crores in the last 10 years in promoting protection products. Policybazaar has a good mix of products, prices, and onboarding assistance. When a customer buys term insurance, income proof, and the medical test is required. Policybazaar has worked with insurers over the years to make this process as easy as possible. For example, credit card statements, price of a customer’s car can also be considered as income proofs instead of income tax statements by the company.

Policybazaar not only helps the customer with the buying journey but also in the claim process. It has a Nominee Assistance Programme wherein the nominee can call them and give details of the policy. Policybazaar helps them with the formalities and makes sure that they receive the claim.

Varun Taneja, aged 34 years works with a prominent tech firm as Senior Product Manager. A few months ago, his cousin passed away due to a car accident. He is survived by his wife who is a homemaker and a kid. His cousin had taken a huge loan recently. It was getting difficult for his wife to manage the expenses of the family and she was asking for help from relatives.

Seeing this incident, Varun realized the importance of investing in term insurance. While deciding the sum assured for his term plan, he had made calculations as per the daily expenses of his family only. However, when he contacted Policybazaar, they helped him understand the additional calculations. Earlier, he wasn’t taking into account the expenditure of marriage for his daughter, wife’s medical bills, inflation, etc.

“The most important thing during this time is not stepping out of the house for a medical test. Policybazaar has a criterion which says that if customers are graduate and above, they can undergo a telemedical wherein a doctor will call them and ask about their medical conditions,” said Taneja.

“It's difficult to believe offline agents as the customer wants transparency when buying a product. I could compare policies on Policybazaar, read their terms and conditions. I could pay online and choose monthly premium payment mode as well,” he added. He said that Policybazaar was proactive in mailing all its customers detailing the inclusion of COVID related cover. ((newsletter))