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3 Things to Note As The Life Insurance Premiums Increase Further

dateKnowledge Centre Team dateDecember 08, 2020 views175 Views
3 Things to Note As The Life Insurance Premiums Increase Further

The year 2020 has seen a lot of turmoil in the world. Much like any other time of mass calamity, the insurance industry has been on the forefront for this pandemic as well. Financial services across the world are known to be the leading adopters of digital technologies.

Insurers have been no different. Emerging markets had seen much higher growth in technology adoption by insurers. The year 2020 accelerated the process multi-fold. The pandemic coupled with the accelerated adoption of technology-enabled insurers to convert awareness into a policy.

While the year (financial year) is yet to complete and data for the third quarter is yet to arrive, the first two quarters show significant growth.

On the other hand, most people who had a life insurance cover at the beginning of the year can feel thankful. The others who didn’t have it so far have started considering it seriously. Pandemic has made more people aware of the insurance than ever before.

1. Why the Increase in Premiums?

Insurance is a community product and the larger the adoption among the members of a community the more stable premiums can be. However, in a market like India, term life insurance penetration is still one of the lowest in the world.

Thus, you can expect premiums to change rapidly as more people subscribe to the concept. In this case, the premiums could change based on the following two factors:

  • Insurer’s policy distribution expenses
  • The total risk assumed by the life insurer

This time the increase has been due to a global rise in the premiums of re-insurers, as the risk to life increased worldwide.

2. Effect on Existing Policyholders

Should you be worried about additional premiums on your existing life insurance plans?

Not really, the new premium rates will affect only new buyers. So, if you are buying a new term insurance plan, you may have to pay the premium at new rates.

3. Worth of a Term Life Insurance

Does the premium increase make term insurance lose it’s worth?

Seems unlikely. If you are a 30 years old healthy male, you pay about Rs. 11,000 per year for a cover of Rs. 1 crore. Even if your premium is to rise 20%, it’ll still be a meagre 13,200 for a cover which is about 100 times larger.

Factors Driving the Premium of Your Term Life Cover

While the increase is because of various factors, it is a general increase applicable to every new insurance buyer. The premium for your individual life cover may still vary based on a few key factors. The amount you pay out is often based on your age, the type of coverage you want, your lifestyle choices or your career choices.

Your Age

Age is one of the primary factors determining your term insurance premium. Your age determines the likelihood of claim on the life insurer. Since younger people carry a lower risk of death the premiums are low. Premiums increase as you age.

This is why you should purchase a term life insurance when you start earning.

Lifestyle Habits

Lifestyle habits such as alcohol and tobacco usage increase the risk of contracting a life-threatening disease. Thus, if you are a smoker you may have to spend a little more on the term life cover.

Health Status

Health plays an important role in the cost of your life cover. Your premium may be higher if you have an existing health condition, major physical deformity or disability.

Although the insurer may ask for a medical test to determine your present health status, you will also fill the family history in the application form.

Occupation

Life insurers divide the occupational hazard on life between three categories.

  • Highest Risk & Premium: Categorises all occupations involving high-risk physical labour
  • Medium Risk & Premium cost: All occupations which require specific skills and working with dangerous tools but not hard physical labour.
  • Low Risk & Premium: All office or desk jobs, which do not involve mechanical tools or physical labour.

Points you need to consider while looking at various plans.

  • Do your research: As an applicant for life insurance, you should do thorough research to help you save money and receive maximum benefits. Look for features which add to your comfort during the policy tenure and the comfort of your loved ones at the time of claim.
  • Check the Claim Settlement Period: The best term insurance plans offer a single day claim settlement for policies which meet the criteria.
  • Don’t Hide Any Information: You should fill the application form in detail and to the best of your knowledge. Misinformation can lead to the rejection of claims later.

If you are salaried the best way to pay the regular premiums is on monthly basis. You can also opt for Electronic Check System (ECS) payment that will periodically debit your bank account with the required insurance amount. Also, you can choose to schedule a payment through net banking that will allow you to make a premium payment with the convenience of interval payments.

Regardless of how much premium you are paying having insurance is of paramount importance and you should not delay getting one. Your life insurance premium may sound like a payment today but will be of great help in case of your unexpected demise. They will offer solid support of financial stability for your loved ones.

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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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