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Does Being Affected by COVID Affect Life Insurance Premium?

dateKnowledge Centre Team dateMay 28, 2021 views212 Views
Life Insurance Premium and COVID-19

Before the pandemic struck the world, only a small portion of Indians were interested in or considered it necessary to buy a term insurance plan that provides health care facilities and aid during medical emergencies. With the dire situation that has been brought forward because of COVID-19, more people have reconsidered their choices and are now buying health insurance.

How is COVID-19 Affecting Life Insurance Premium?

Because of the rise in the mortality rate of insured, increased medical risks faced by people who had contracted COVID-19, and other such factors, various life insurance institutions have increased the prices and premiums of their life insurance and term insurance plans.

There is no specified model followed to monitor this rise in premiums. This is because there is a lack of data that supports that people who were affected by COVID-19 will be at risk of other health conditions as well. The direct deaths have caused an increase in the pricing of insurances.

Thus, new policyholders should ensure that they read everything related to their claims. It will ensure that they know what to expect from the term insurance in case they or their family member contract COVID-19.

Also, one should keep in mind that most life insurance and term insurance are long-term. However, because of the short-term nature of the COVID-19 disease, there may be some confusion while ensuring that the policyholder contracted the virus after the policy was initiated.

The number of people interested in these plans is rising along with the rate of the premiums set for the plans. So, it cannot be deciphered that does being COVID-19 positive affect life insurance premiums. But a thorough check with all the new terms is highly advised.

Learn 8 ways to reduce life insurance premiums.

What are the Changes Made by Insurers and Companies in Insurance Policies?

No sector has been left unaffected by COVID-19. All companies had to change the way they work to accommodate the pandemic. The same principle applies to insurance companies. The onset of increased cases and deteriorating health of the insured have forced the companies to make the following changes in their policies.

  • Mortality

    Mortality has now been divided into two causes. The first is referred to as direct deaths that happen before the person has fully recovered from COVID-19. The other category is indirect death that occurs after the person has recovered from the infection of coronavirus. These deaths may occur due to the weakened immune system of the person that is common after contracting the infection.

Life Insurance Premium and COVID-19

  • Cover specialized for pandemic

    The insurers have offered the policyholders plans and protection against diseases that are caused because of viruses. These special plans have very detailed terms and conditions and are applicable for specific cases only.

  • Tailor-made policies

    Before the pandemic, insurers offered a common set of life insurance policy to people. However, now that people have become more aware of insurance, they require policies that are customized for their needs and fulfil their future and present requirements.

  • Digital access

    Policyholders can now access their life insurance or term insurance policy directly from the website of the application on their phone. With these features, they can make claims on the policy, pay their premiums, check the status of their policy, etc., without having to visit the insurer branch.

  • Easier process of claim setting

    Because of the serious conditions that policyholders may face, life insurance companies have eased the process through which they can make claims of their plans. The time required to raise a claim has been reduced as well to ensure that claims are settled with more efficiency.

Impact of COVID-19 on Life Insurance Policies

COVID-19 had created issues such as loss of jobs, failure of new businesses, wage cuts, etc. This has resulted in people being unwilling to continue or renewing their policies. Insurers are not only handling the problem of high mortality rates; they also need to deal with a low-interest rate that can impact the guaranteed returns that are assured in various term insurances.

Here is how different segments of the insurance sector have been affected by COVID-19.

  • Term insurance

    People are getting more aware of protecting them and their family against unprecedented situations such as the pandemic. This is the reason why not just life covers but also term insurance is expected to experience a boost in its demand.

    However, people are avoiding buying insurance plans with higher cover amounts and premiums because of financial instability. Furthermore, higher valve covers need the insured to be medically tested. This condition also plays a role in the aversion of people from an insurance plan that has high coverage.

  • Long term savings insurance

    Because of the uncertainty that COVID-19 has caused, people are reluctant to invest capital in a long-term savings plan. They prefer liquidity and plans that can provide immediate returns or protection shortly. Long-term products and insurance plans may experience a decline in their demand because of the pandemic. People are planning to buy saving plans that offers guaranteed returns such as Guaranteed Income4Life offered by Canara HSBC Oriental Bank of Commerce Life Insurance.

  • Insurance-linked with investment

    COVID-19 had a plummeting stock market. The sheer decline in the market has created a sense of doubt among people, averting them from the idea of buying an insurance that is based on the investment. Unless the condition of the stock market stabilizes again, investment-linked insurance will face lesser popularity among the insured.

    The declining economy because of COVID-19 has resulted in uncertainties for the insurance companies. The pandemic is not only responsible for countless claims to cover hospital bills and other medical requirements, but it has also increased the mortality rate steeply.

    The pricing models that were offered till now had been mostly revised to include new terms and conditions that are inclusive of the new situations and statistics that are caused because of coronavirus. Contact your insurer provider and ask about your premium details so that you stay on the safer side.

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Frequently Asked Questions (FAQs) for Life Insurance

The premium is one of the most important factors to consider before buying a policy. Many people buy a life insurance policy with a high sum assured but are unable to process the premiums for the entire premium payment tenure. You can get a better idea of the premium outgo with the premium calculator available in the 'Tools and Calculator' section of www.canarahsbclife.com.

Life insurance plans come with several riders which increase the efficiency of the policy for the buyer. For instance, if you have a history of terminal illness in your family it would be advisable to opt for terminal illness rider with your term insurance. Riders or add-ons help in customising the standard policy benefits for the requirement of different families. The iSelect term insurance plan comes with a built-in cover for terminal illness, and option for protection against accidental death or disability. You can also opt to cover your spouse's life under the same policy by paying an additional premium.

Insurance companies calculate the premiums based on several factors such as age, gender and occupation.

Age:It is one of the biggest factors that influence life insurance premiums. Premiums tend to be low when the life insured is younger as the chances of contracting diseases is low. Young people also opt for policies with longer tenures and pay premiums for a longer duration, which makes the policy cheaper for young people.

Gender:The insurance premium for women is generally lower when it comes to life insurance plans. Women live longer and pose a lesser risk of a claim leading to lower premiums for them.

Lifestyle habits:The premiums for people who smoke or drink is always higher due to higher health risks.

Policy term:Policy terms are also taken into consideration by insurers while deciding the premium amount. Policies with longer tenure are cheaper as compared to short-duration policies.

Mode of purchase: The platform that you use to buy the policy also determines how much you will have to pay for the plan. People who buy life insurance policies online have to pay lower premiums as compared to offline policies.

Occupation:The nature of your work is an important factor that influences the premium amount. Certain occupations like shipping and mining are considered more dangerous as compared to jobs in services industries. The insurance premium rises with the risk profile.

Processing life insurance claim is a transparent and smooth process with Canara HSBC Oriental Bank of Commerce Life Insurance.

In case of the death of the life insured, the nominee will have to intimate the company by filling a Death Claim Form and sending it to the nearest branch office.

Once the form is received, the claim is registered by the insurer.

After the registration of the claim, the company will send the claims pack along with the related forms such as physicianâ s statement form and employer certificate that need to be filled.

Along with the duly filled forms a few documents such as original [policy document, death certificate, copy of bank passbook, hospital or treatment records, photo identification and address proof have to be provided.

The claim is processed on the submission of relevant documents. Once the documents are verified, the claim amount is released post all due diligence.

Household expenses rise with age. The cost of children's education increases along with other lifestyle expenses. The iSelect term plan offers an option to increase the cover according to the life stage. If opted, the insurance cover increases by 25% at every 5-year terminal till the 20th policy year.

Even though a life insurance policy is bought to protect your family in your absence. There are chances of the claim being rejected due to several factors.

False information: If the policyholder provides false information or conceals important information while buying the policy, the insurer has the right to reject the claim after his/her death.

Type of death: Deaths due to suicide in first policy year, intoxication or pre-existing disease is not covered under life insurance.

Premium payment: The payment of premiums on time is of utmost important to avail the benefits of life insurance. Life insurance policy may lapse on the failure to pay the premiums

Nominee details: An insurance company can put the claim on hold if the nominee details have not been filled or not been updated by the policyholder.

Suicide: If the life insured commits suicide within 12 months of buying the policy, the insurance companies generally pay 80% of the total premiums paid.

Buying life insurance online is not only safe but a better option. Online life insurance policies have lower premiums and the individual is not required to visit the insurer's branch or a bank. Online insurance policies also offer higher benefits. Customers should, however, buy online policies only from credible insurers and should check for SSL certificate on the website to ensure that the website is legitimate.

The cost of life insurance policies varies depending on factors like age, gender and occupation. The average cost of life insurance plans, especially term plans, is very low compared to the amount of coverage offered.

An individual is allowed to have multiple life insurance policies. People opt for more than one policy to increase the cover or avoid claim rejection. In case of multiple policies, even if the claim is rejected by one insurer, the beneficiaries may receive the benefit from a different insurer.

Life insurance policies are of different types. In the case of unit-linked or endowment policies the policyholder receives the maturity benefit at the end of the policy term. However, in the case of term insurance plans, there are no maturity benefits. The death benefit is only paid out after the death of the life insured.

When you buy life insurance, the insurance company asks for the nominee details. Only the person named as the nominee in the policy can cash out a life insurance policy in case of death of life insured.

A life insurance policy is generally taken for a specified period. After the policy duration of a term plan gets over, the policy simply terminates and ceases to exist. However, in the case of unit-linked plans or endowment, you can use the policy as a tool for retirement planning and the accumulated corpus is used by the insurer to pay you monthly amounts for your entire life.

If a policyholder purchases a term plan for 25 years and dies during the policy term. The family receives the death benefit. In the case of iSelect term plan, the policy provides four payment options to the beneficiaries. If the regular payment options are chosen the policy works as a source of regular income.

It is a popular misconception that life insurance is only for accidental deaths. A term life insurance plan like iSelect also covers terminal disease along with death. A terminal illness cover is important as health insurance pays only for the cost of treatment and hospitalization, but a terminal illness cover pays you a lump-sum amount which takes care of other expenses. On the other hand, unit-linked policies such as Invest 4G cover death and also provide decent returns for other financial goals such as buying a house of child's education.

It is ideal to buy life insurance in your early 20s because it’s is the time when people have just started with their professional life and so there are lesser responsibilities and financial liabilities to take care of. Also, if you buy life insurance at this age, you will be paying relatively lower insurance premiums since it’s a due fact that mortality rate in case of young people is low. And that is why insurance companies offer lesser premium rates to younger people as they think that they are most likely to be fit and healthier with less chances of filing a claim in future.

Once you have cancelled your life insurance policy, you will instantly lose your life insurance cover. Afterwards, your insurance company will get in touch with you and ask for valid reasons regarding the cancellation of your policy. In case you cancel your life insurance policy within the grace period, i.e. 15 to 30 days, depending on your insurer, then insurance company will reimburse the premium amount paid by you. But, no refunds will be paid to you if the policy is cancelled after the grace period.

Yes, you can take life insurance under Married Women’s Property (MWP) Act, 1984 only if you are a married man and a resident of India. Buying a life insurance plan under MWP Act would be helpful in saving your family’s financial well-being when you are not around. As per this policy, only wife and children would be eligible to receive the death benefits. You can also buy a policy if you are a widower or a divorcee. However, in that case, you can give your child’s name as your beneficiary. It is very simple to buy a life plan under MWP Act. All you need to do is to fill up an MWP addendum while purchasing an insurance policy.

Yes, there are different payment options for you to pay premiums. Here’re some of them

    1. Regular premium payment option – This premium payment option allows you to pay premiums equal to your policy term either monthly, quarterly, half yearly or annually.

    2. Single payment option – Through this premium payment option, you can pay the lump-sum amount in one single payment.

    3. Limited payment option -In this premium payment option, you can pay premiums for a specific period of time less than policy term either monthly, quarterly, half yearly or annually, but benefits of insurance can be enjoyed for a longer period of time.

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