Stuck with Expensive Term Life Plans. Here is what to do.

Over the Last few Years, you might have seen a number of Insurers come up with very attractive life Insurance plans. The rates have plummeted and Term life Insurance has become very cheap. The question arises for people who are struck in expensive Term Life plans. How do they take advantage of these plans?  If you have bought one of these expensive plans and pay a regular premium they read on.

Let’s say for that you have purchased one of the old fashioned from one of these companies when you were 30 with a policy term of 25 years and for Rs 1 crore Sum Assured.

The premiums that you would pay is something like this:

Insurer	Policy Name	Premium
LIC	Jeevan Amulya II	Rs 22,022
Max Life	Platinum Protect	Rs 21,123
Aviva	Aviva Life Shield Platinum	Rs 14,424

Let’s Say you are now 35. If you are to buy Term Life Insurance now. The rates for 20 year term and 1cr Sum Insured will look something like this.

Insurer/Policy	Claims Payment Record[1]	Annual Premium(With ST)
Reliance(Online Term)	Rejects 7.54% of all claims , Settles 90.00% of claims in 30 days	Rs 9,455
Max Life(Online Term)	Rejects 5.75% of all claims , Settles 80.00% of claims in 30 days	Rs 9,775
Bharti AXA (e-Protect)	Rejects 9.98% of all claims , Settles 90.00% of claims in 30 days	Rs 10,449
BSLI(Easy Protect)	Rejects 13.00% of all claims , Settles 83.00% of claims in 30 days	11,179
TATA-AIA (i-Raksha)	Rejects 12.19% of all claims , Settles 84.00% of claims in 30 days	10,000
Aegon (i-Term)	Rejects 33.49% of all claims , Settles 59.00% of claims in 30 days	10,000

If you have a regular payment term policy then you may consider a switch by simply buying the new policy and stop payment of premium on the old one thereby lapsing that policy. Please note that if you have a single pay option or a limited pay option then, a switch will not make much sense as you have already paid a substantial part of your premium already.

There is one other downside that you should be aware of. If there is a claim on a life policy within two years of purchase then the claim attracts more scrutiny. This is not to say that claim will get rejected but more proof may be required from your side. Also don’t just go by premiums looks at the track record of the Insurer in paying claims specially ones that are less than two years old.

It would be good if Insurers offer to move the customers to their newer products but that won’t happens.  So the customer should look out for a better deal.

PolicyLitmus

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[1] Based on Public disclosures from FY 2011 – 2013 wherever available.