If you are looking to buy a term insurance plan, you may need to hurry if you want to save on costs as well. The premium for term insurance plans could soon increase if global reinsurers increase their rates. “Yes that’s true. Some reinsurers are expected to increase rates. However, this information remains confidential and is only made available to the public once it is finalized and deployed,” says Varun Gupta, Chief and Appointed Actuary, Bharti AXA Life Insurance.
The increase in term plan premiums is attributed to an impending rise in reinsurance rates by global reinsurers. A portion of the lives taken out by life insurance companies is passed on to reinsurers who bear the risk for which insurers pay them a premium. When reinsurers increase reinsurance rates, there is a subsequent increase in the premium rates they have to offer to potential buyers of temporary plans.
The impact of Covid-19 claims could be one of the reasons why term plan rates need to be revised by insurers. âDue to several factors, including Covid-19, the actual amount of claims settled was higher than expected. Therefore, keeping in mind future macroeconomic factors, the underlying mortality rate, as well as other criteria, some reinsurers have decided to revise rates, âadds Gupta.
However, once reinsurers increase their rates, there may not be an immediate or corresponding impact on term insurance premium rates in India. âThe decision to increase contribution rates depends on the strategy of the company. Insurers can increase premiums, absorb the increase in premiums by reducing their margins and can also reclassify the product to achieve business results based on their strategy. The extent of the variation in the premium will therefore depend from one insurer to another, âexplains Gupta.
A term insurance plan provides life coverage up to the period chosen by the policyholder. In the event of death at any time during the term of the policy, the sum insured (amount of life cover) is paid to the nominee, while in the event of survival of the term of the policy, there is no no value at maturity. Being pure protection coverage, term plans are low cost, high coverage plans.
âTerm insurance is typically purchased for a longer term of 25 to 40 years as the policy term. In such a scenario, it makes perfect sense to avail the plan at lower premiums in case you plan to purchase coverage for yourself. Once you buy a term insurance policy, the premiums do not change during the life of the policy. The monetary savings can be quite large over a period of 25 to 40 years. I would strongly recommend term insurance coverage up to 20 times your current annual income at the earliest, âsays Deepak Yohannan, CEO of MyInsuranceClub.
If the term insurance premium rate is revised, it may not be the same in all strata, as the actual revised premium rates will differ depending on age groups, gender, sum insured chosen, etc. It is important to note that even if there is an increase, there will be no impact on existing policyholders. âLife insurance premiums are blocked from the day the insurance policy is taken out. Therefore, existing customers or customers looking to purchase insurance in the next few days do not have to worry about increasing premiums, as the amount of their premiums that they are currently paying will remain locked in and will not be lost. not affected by reinsurers’ decision to increase premiums, âGupta says.
Once purchased, the premium remains fixed for the duration of the policy. Any future change in the premium has no impact on the expenses of the policyholder. Purchasing a term insurance plan before the increased rates take effect will allow you to keep the rates for the duration of the policy.
Temporary plan coverage is a must for anyone with dependents and procrastination should be avoided when purchasing them. Ideally, one should get life coverage of around 15 times one’s net annual salary and continue to review it every five years. Once you have adequate term insurance coverage, start saving for your long-term goals for worry-free financial planning.