Is It Better to Buy Life Insurance Online?

This month started with big sales from leading e-commerce websites and I am pretty sure that many of us jumped in and got lured by the nice deals offered by these websites, just like my friend Aditya and I.

We were discussing in our office yesterday that in these times of uncertainty, we should definitely buy a life insurance cover for our family.

I could not agree more with Aditya.

Excited with his recent purchase online of iPhone 6S where he saved good money but went over-budget, Aditya said, “I just wish, I could also buy life insurance policies online. That will help me save some money on the premium.” While Aditya was saying this, I was thinking that while we are ready to spend extra cash on luxury purchases, we tend to be miserly when spending towards important needs like getting insured for future risks.

“You spent Rs. 10,000 more than you planned on your iPhone, but you are thinking about spending extra on getting an insurance cover for your family?” I said this jokingly.

Aditya quipped, “Friend, any saving is good saving.”

“You can indeed shop for your policies too online. Immediate quotes and easier comparability do provide them an edge over the traditional insurance. However, as the word goes for all online purchases, one has to be a tad careful while going for online plans”

I moved on to explain to him some benefits and at the same time, some additional considerations and precautionary measures while buying life insurance online.

Benefits of Buying Life Insurance Online

1. You Get It Cheaper – Online plans are often 25-30% cheaper than the corresponding offline options due to elimination of the agent commission. In other words, one can also get higher sum assured for the same premium when compared to traditional insurance policies taken through agents.
2. Easier and Transparent Comparison – One can always check out the online plans offered by different companies on their websites and therefore compare the costs associated simultaneously. This also results in psychological satisfaction for the buyer for making an informed decision. One can also make use of aggregators like PolicyBazaar etc. to get that data compiled by these websites on real time basis.
3. Easier to Manage your Policies – Online plans generally issue e-certificates/policies for the insurance policies taken and the documents are transmitted through e-mail instantly. A hard copy is also couriered later for paper records.

Additional Considerations While Buying Life Insurance Online

Given the above benefits, one can always be lured to buy the policies online instantly. However, do consider these factors before making the final decision:

1. Search Right, Search Correct – When insurance is bought online, the comparison is based on the search criteria entered by the user itself. Hence, make sure you enter the insurance needs that fit your profile correctly. Unlike under offline options, no agent will help you refine your insurance needs and search criteria.
2. Read Terms of the Policy Properly Before Buying – It has been noticed that many times, insurance companies quote for a plain vanilla coverage for the risk cover under online plans. Traditional policies under offline route tend to cover certain riders like accidental cover etc. by default. The fine print of this is always in the terms & conditions. However, it is always possible to add riders and benefits to the policy on the website itself. Make sure you compare the policies only with same features like equal sum assured, riders and benefits.
3. Claim Settlement – Even while the claim settlement processes are not different for online or offline options, the difference comes due to the fact that under offline options, we communicate with the insurance company through our insurance agent who takes care of the necessary technicalities. Under online plans, the nominee needs to do the whole process by self, which can seem a little intimidating, given that one is not known to the process generally.

Having said all that, it is also important to understand that claim settlements otherwise don’t differ for the insurance companies for online and offline plans. This is a kind of misconception propagated by the agents to protect their business. No company provides the claim settlement ratio separately for online and offline plans.

So, as discussed above, it is beneficial to buy life insurance online, but at the same time, one should take the above precautions to ensure that you are taking an informed decision.

“That indeed will help be helpful, Simar. But I think I will need your company again to buy the insurance policy online.” Aditya confessed that financial things are hard for him to understand.

“So, why wait for yet another time. Let’s do it now itself, on your new iPhone.”

We both laughed and Aditya is already opening the phone lock to do the process.

Simardeep Singh is a Chartered Accountant based in Delhi. He loves sharing his knowledge about personal finance and investment. He blogs regularly at  www.simardeep.com.