Buying Life Insurance Online: Quick, Cheap, But Read The Fine Print

• Online life insurance offers cost, time, and convenience advantages.

• Proper disclosures and coverage assessment are vital for smooth claim settlement.

• Compare policies using claim settlement ratios, benefits, and exclusions.

• Use insurer websites, reports, and aggregators for accurate policy research.

Buying life insurance digitally is a convenient and quick method of buying life insurance in a few clicks in the present age of handheld devices. In most cases, companies are able to offer better pricing/returns on insurance products offered digitally by passing on the savings on third-party distributor costs to the customer. "The three key areas where the digital medium scores over the physical medium are CTC – Cost, time, and convenience," says Bhavna Verma, chief & appointed actuary, IndiaFirst Life Insurance.

It's now trending to buy online life insurance where customers can see the different insurers' premiums and coverages. "However, many clients still prefer to go for the offline medium by taking personalised services by agents or brokers," says Surender Tonk, vice president, Insurance Brokers Association of India. In case you are buying a life insurance policy online, it is important to do proper due diligence.

Fine Print, Big Impact 

It is important to do adequate research before narrowing down on a policy in an online purchase. A few mistakes to watch out for are the risk of under-insurance, incomplete disclosures during purchase, and not understanding the policy obligations and benefits completely.  

First and foremost, it is important to carefully assess the right amount that your family and dependents would require to fulfil various financial obligations during their lifetime and purchase cover accordingly. "Equally important is making accurate health and financial disclosures, which directly impact claim settlement in case of an unfortunate event; therefore, diligence is necessary there," says Verma.

Life insurance savings plans are fundamentally slightly more complex than other short-term financial products, as premium commitments and expected benefits are spread out over the long term.  "Beyond eventual returns, it is important to fully understand the product structure, contractual obligations, cashflow stream, exit options (just in case), and whether the product meets your financial planning and life stage needs," says Verma. The various documents that help you understand the policy are the product brochure, online premium calculators, benefit illustrations, etc.

What To Keep In Mind 

There is a host of information sources available to anyone looking to buy life insurance, including but not limited to company websites, press releases, annual reports of the regulator, industry reports, and web aggregators that provide comparative information. For a term insurance product, price and claim settlement ratio may be critical vectors to compare between different products.  

"The customer should see the claim settlement ratio of each insurer before buying the policy, read all the coverages carefully, and compare the coverages very minutely. One should also visit the insurer's website to learn more about the coverages and exclusions and be better informed," says Tonk.