If you are a first-time buyer of a life insurance policy with not enough understanding of insurance products, a standard term plan could be a great option for you. In line with insurance regulator IRDA's guidelines on standard term plans, insurers have started launching Saral Jeevan Bima policies that will make it easier for low-income earners to buy a pure protection plan. Insurers have devised new ways to fetch income proofs to make the process simpler for prospective buyers.
A term plan or a pure protection plan ensures corpus for the policyholder's family in case of his or her untimely demise. The policyholder gets nothing if he or she survives the policy period. The insurance coverage under term plan for most insurers start from Rs 20-25 lakh going up to crores. However, with the Saral Jeevan Bima, one may get a coverage between Rs 5 lakh and Rs 25 lakh.
Edelweiss Tokio, PNB MetLife and Exide Life Insurance have already launched the plan, while Aegon Life Insurance, SBI Life Insurance and others are in the process of launching it. PNB MetLife will offer you a 20 per cent discount on annual premium if you buy the policy online, says Amit Garg, Deputy Head, Term Insurance BU, Policybazaar.com.
Before you consider this plan, you must know the premium on such policies is higher than what is otherwise available for regular term plans of the same coverage and similar risk profile. However, as things stand today, low-income earners may not be eligible for an insurance policy in the first place due to stringent issuance norms.
"Self-employed people in the income bracket of Rs 2-5 lakh find it hard to buy insurance policies due to requirement of income proof. With Saral Jeevan Bima, insurers have adopted smarter ways of analysing income streams such as four-wheeler or two-wheeler RCs. This may take the policy issuance rate for this segment to 70 per cent from 30 per cent now," Garg says.
Naval Goel, CEO and founder, PolicyX.com points out that Saral Jeevan Bima can be expensive as compared to other plans but it carries its own benefits. "Price alone cannot be a factor for driving insurance penetration. The bigger problem in India is the eligibility criteria. IRDAI has asked insurers to launch this product to make sure that the product is simple and easy to understand and that it covers everybody."
Garg says they are already seeing good traction on their website with regard to Saral Jeevan Bima policies. "Although the prices are little higher due to relaxation in underwriting norms, these plans are filling a need gap as a large chunk of willing low-income earners are unable to buy term plans," he says.
"At least 40 per cent of visitors on our website have declared themselves as self-employed and income less than Rs 5 lakh. This is the segment that we are targeting for Saral Jeevan Bima policies," he adds.
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