Uncertainty and fear motivate many people to take swift action. But there are many who even during this time of a worldwide pandemic have refrained from purchasing term insurance to protect their families. Perhaps, the soon increasing cost of term insurance will spur them into action.
Yes. According to industry sources, term insurance premiums are likely to increase within the range of 15% to 50% this year. Which means you will have to shell out more to ensure financial protection for your family and enjoy term insurance tax benefits.
Act now and secure the future of your loved ones, especially in times such as these, with a Term Insurance plan.
What are the Factors that Impact Term Insurance Premium Costs?
Reinsurers and insurers are both involved in determining the cost of life insurance based on some time-tested assumptions. Reinsurers are responsible for providing financial support to insurance companies and hence they have to bear some risks associated with the term insurance plans issued to policyholders.
Insurance companies create a fund accumulated through funds received from policyholders and use this fund to pay off claims raised every year. Term insurance premium rates are based on the measure of risk of mortality (death) at various ages. However, the rate of mortality in India is based on an assumption.
How is the Rate of Mortality Fixed by Insurers?
Life insurance companies in India have fixed mortality rates based on an assumption that policyholders buying term insurance plans have a probability of death that is 25% of the average India population.
This assumption methodology works in favor of policyholders who buy term insurance online. Since insurers assume that those who buy term insurance online belong to a more affluent class and their mortality rate is assumed as 20% of the average Indian population.
On the other hand, availing financial protection for your family and enjoying term insurance tax benefits with an offline term insurance plan costs you more. This is because it is assumed that such people will have a higher mortality rate, which is 33% of the average population.
However, this is not the only reason why online term insurance plans are cheaper. As there are no intermediaries or commission agents in these transactions, the insurance company can transfer that cost benefit to consumers. Also, insurers save on other costs such as overheads, stationery and resources involved in offline purchase.
Why are Term Insurance Costs Likely to Increase?
Until now term insurance premiums were determined on the basis of the assumptions that we have mentioned above. However, insurers and reinsurers have realized that this methodology may be flawed due to consistent rise in life insurance claims.
Insurers worldwide are now looking at a trend where mortality rate is increasing more rapidly than previously assumed. Moreover, term insurance premium in India is cheaper than in developed countries such as Dubai, Singapore and the United States.
With increasing incidence of claims propelled further by the coronavirus pandemic, reinsurers are likely to revise rates which will compel insurance companies to increase term insurance premium rates as well.
Don’t wait for premium rates to increase as term insurance plans can get costlier by up to 50%. If you haven’t already, buy a Term Insurance Plan available in market today, and secure the future of your loved ones.