- Term insurance plan premiums are set to witness huge hike
- According to experts, premiums can be hiked up to 40 per cent
- Premiums have remained more or less constant for the past 5 to 6 years
Term insurance plan premiums are set to hike up to 40 per cent anytime soon as reinsurers are planning to increase the rates and tightened their underwriting norms in the wake of the Covid-19 pandemic. The Covid-19 related casualties claim post-second wave could be one of the reasons for the term plan premium increase.
"Term insurance premiums are expected to see a rise owing to increased stress in the reinsurance business. The hike is significant as term premiums have remained more or less constant for the past 5 to 6 years. It's essential to remember that a term plan is the "simplest and the most cost-effective" life insurance product in the market," Anilkumar Singh, Chief Actuarial Officer, Aditya Birla Sun Life Insurance, told IndiaTvNews.com
What is Term Insurance?
Term insurance, also known as pure life insurance, is a type of life insurance policy that provides coverage for a certain period of time or a specified "term" of years. The life cover term is chosen by the policyholder. On the demise of the insured anytime during the policy term or time period specified in the policy and the policy is active, or in force, the sum assured (life coverage amount) is paid to the nominee. While surviving the policy term, there is no maturity value. In other words, the only value is the guaranteed death benefit from the policy.
Why one should opt for a "Term Insurance Plan"?
Amid rising concern due to the Omicron variant of Covid-19, securing the financial future and having a life cover is a must.
"Protecting one’s future financial needs with a term insurance plan is definitely good for the long run. In view of the increasing uncertainties in people’s lives, having a life cover with a term insurance plan is a must and one of the safest options, securing the financial future of one’s family members," Anilkumar Singh said.
"It is prudent to evaluate the amount of money an individual’s family would require as monthly expenditure, to fulfill goals like education, marriage, etc., and to pay off any debt. One should assess the value basis their annual income, lifestyle, and the future value of money," he added.
How to lock term plan premiums at a lower rate?
As insurers are engaged in talks with the reinsurers on the quantum of the hike, term plan premiums are set to become costlier for policyholders. Following this, individuals are seeking the best way to buy a pure plan at a lower rate. The term plan premiums hike is likely to affect new policyholders' pockets. Buying a term insurance plan before the increased rates come into effect will let you lock the entire policy term at lower rates.
"That's why we're are suggesting to buy now and lock premiums at a lower rate," Anilkumar Singh said, adding, the term insurance premium hike will vary from one insurer to another.
Notably, once purchased the premium remains fixed for the entire tenure of the term plan, and a hike on premiums in the future does not impact the outgo for the policyholder.