Resolve to get right-sized term insurance this year
Hyderabad: This new year, resolve to value your life the right way and take a right-sized term insurance cover. It is a must-have in the financial planning itinerary as it gives sufficient cover and is relatively affordable.
If you already have a policy, enhance the cover and ensure that you renew it before it lapses. If you do not have one, take a policy at the earliest as the premium of the policy usually remains the same throughout the policy term.
The premium prices have increased or will increase shortly. Moreover, the insurance companies are making the underwriting rules, which govern the quantum of cover to be given, more stringent. This will make it costlier and also perhaps a little tougher to get term insurance without medicals. And with the third wave of Covid surging, getting medicals done will also take time.
How is the pricing trend?
ICICI Prudential Life and HDFC Life Insurance have already increased the premium of their respective term plans in December 2021. Bajaj Allianz Life Insurance hiked the premium on term insurance plans recently. Players like Tata AIG Life and Birla Sunlife Insurance and Max Life have plans to increase the premiums shortly. The hike in the premium ranges from ten to 30 per cent across the industry, according to a top official of an insurance distributor.
Why are premiums rising?
The reinsurance companies have conveyed last year about their plans to increase the reinsurance costs. The companies offering term insurance, to make up for the increased reinsurance costs, have absorbed some of the hikes. In some cases, decisions have been made to sell fewer policies in certain pin codes, where they perceive the risk to be higher. However, the hikes are not uniform across the industry.
One company upped the premium prices by 10 to 12 per cent hike but decided to not offer term plans to undergraduates. It also doubled the threshold income of both salaried as well as self-employed to be able to avail a term plan.
Telemedicals
Earlier, telemedicals were used extensively to approve a policy. However, the medical tests are likely to get more stringent. Earlier, companies allowed people to renew policies even if the policyholders failed to renew within the grace period without fresh medical tests.
But now the condition is likely to change and they might insist on insurance policyholders to go for fresh medical tests if they renew after the grace period ends and the discretion to renew or not will rest with the company.
Under insurance
Many people are underinsured and this must change quickly. Typically, the cover should be 10 to 15 times the annual salary. The cover should be Rs 36 lakh if the salary is Rs 3.6 lakh per annum, Rs 50 lakh if the salary is Rs 5 lakh and Rs one crore if the salary is Rs 10 lakh. The insurance cover should be rounded off the higher number – say if the salary is Rs 5.3 lakh, the cover should be Rs 55 lakh or at least Rs 53 lakh and rounded off to Rs 50 lakh. The difference seems small but will be of significant value. Also, the difference in the premium is negligible.
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