If you are considering to buy a term insurance plan, you might have to hurry up a bit as, after the recent price hike in the month of April 2020, the insurance premiums are set to experience another significant increase in the months ahead.
Term insurance is an excellent & affordable way to secure your family’s financial future in your absence. Term insurance plans not only protect one’s family financially in case of their sudden demise but also provide comprehensive coverage from a range of uncertainties, including accidents and critical illnesses like heart diseases, cancer etc. If you are considering to buy a term insurance plan, you might have to hurry up a bit as, after the recent price hike in the month of April 2020, the insurance premiums are set to experience another significant increase in the months ahead.
Pure protection term plans, including the ones from prominent insurers like HDFC Life, ICICI Prudential Life, Max Life and Tata-AIA, witnessed a price hike between 20% and 35% in the month of April 2020. Now the premiums of term insurance plans are expected to increase by up to 40%. Insurers who have already revised their premiums by a certain percentage would further increase the prices by remaining values. For the insurers who haven’t yet, would be increasing the prices in the months to come.
Rise in Term Life Insurance Prices
To put things in perspective, for a 35-year-old male, non-smoker residing in a metro city looking for a Rs 1-crore term plan with coverage till 75 years, the monthly premium for TATA AIA term plan surged from Rs 1104 to Rs 1490, witnessing a 35% increase. Similarly, ICICI Prudential incremented the premium by 22% while HDFC and Max Life premiums have been hiked by 18% and 9%, respectively.
Reason Behind Term Life Insurance Price Hike
In order to determine term insurance premiums by the reinsurers, it has been assumed that for every 10,000 lives covered under term insurance plans, only 3 deaths would occur in each policy year. While the expected number is 3, the actual deaths per 10,000 policies issued in a policy year are between 4 & 4.5. To add to the reinsurer woes, the claim amount is massive in case of term insurance with an average policy sum assured of around Rs 1 crore. In the ideal case scenario, actual vs expected ratio should be around 1. This is clearly not the case in India, with the ratio being more than expected, leading to a negative experience in mortality. This situation has lead to revisions in the term insurance premiums by 40%, as demanded by the re-insurers.
Term Plans Remain a Must-Buy
Planning your future well in advance is one of the most important things that you should do to ensure you and your family are financially stable throughout lifetime. A term life insurance plan does exactly this – provides the insured person’s family with a sum assured on the death of the individual to make sure that the family does not have to face hardships after their loved one is no more. A term insurance plan offers life cover for a specific amount & tenure. If the policyholder passes away during the policy term, the insurer pays a death benefit to the beneficiary or the nominee.
A good term insurance plan helps you protect your even better by covering you against most important 3Ds of your life that are Death, Disease and Disability. Term insurance plans can be bought at a very nominal cost. The payouts can be customised as per your needs, whether it be a lump sum payout or staggered payout in monthly instalments. It is further beneficial as the premium you pay towards it can help you avail a deduction under Income Tax Laws. With term insurance prices set to rise anytime soon, it is best to buy a term plan at the earliest as the earlier you buy, the lesser you pay.
(By Santosh Agarwal, CBO-Life Insurance, Policybazaar.com)
Disclaimer: The views of the author are personal.