Online Term Plans – Affordable or Expensive - Greyfont

Online Term Plans – Affordable or Expensive


You might get a jolt if you check the price difference between online and offline term plans. This price difference may be as good as25-30%. So, which one as per you would be a good deal?

If you are smart enough, the online mode would be your best buy. Simply because these are cheaper than any term insurance plans bought offline. Offline mode may include buying from an insurance agent or by directly visiting the term plan insurance company. Apart from being affordable, the plans that are purchasedonline are very efficient and time saving.


Why the difference?

Spotting the difference is okay. But understanding the reason behind is what the next question would be. However if you carry out a small research, you will understand the difference and come across a common theme. If you go the traditional way of buying the term plans, you would have the option of buying through the agents, consultants or by directly visiting the insurer’s office. Such factors add to the cost of the premium.


However, a plan bought via the online mode is way cheaper since the insurance companies save cost since there are no commissions or payouts to be made to any intermediaries.Besides, the insurance company also saves money on the cost of administration as well as on the paperwork thus causing a drop in the term insurance premium prices.


There is a closer look here. The commission for insurance agents is the maximum in the first year and reduces as the years go by. If you assume the commission to be 25%, that is only for the first year. With consecutive years, the commissions would go down to 10-20% and eventually less than 10% in few more years. So if this was the primary reason, the variance should be about 10-15% and not the 25-30% that we see.


Primary reason for the difference

The target audience being one reason, online term insurance plans are cheaper than offline plans. Many insurers feel that people who indulge in online shopping are comparatively less risky. Simply because, these people tend to lead a better lifestyle and usually have access to better health care systems. This is one reason why your place of residence comes into the picture.


Research indicates that people who live in metro cities such as Mumbai, Bengaluru, Chennai, etc.usually  outlive the term insurance policies rather than people who live in tier 4 and tier 5 cities. In short, the life expectancy is quite high in such cities, the life insurance companies are rest assured about the claims registration and therefore the premium prices too go down. Life insurance companies can actually access the risk profile of the people depending on the location of their residence.


Therefore, if you wish to buy a term plan that would be easy on your pockets, you should go online and buy one. Because, it is time-saving and cost-effective too. Besides, you get to buy the best term insurer by simply comparing the term plans from different insurers online. 


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