Discarding Existing Term Plan for Cheaper Online Alternatives (1)

Discarding Existing Term Plan for Cheaper Online Alternatives

Planning to change your term insurance plan for a cheap alternative? Here is what you need to know about it.
Discarding Existing Term Plan for Cheaper Online Alternatives (1)
Ravi had a term plan which he purchased five years back when he was 23 years old. He was paying an annual premium of Rs 12,000 for a cover of Rs 25 lakhs. He saw that the same cover was available on an online term plan for Rs 8,000 a year. He promptly made a switch.
It worked well for Ravi because he was young and healthy. But is it always a good idea to discard your existing term plan for a cheaper online alternative? Perhaps it is not.  

What makes the online term plans cheaper?

The offline term plans involve a lot of paperwork and processing which is minimised if you buy a policy online. Thus, the insurers pass on this benefit to their customers in the form of some discount. Thus, the online purchase is cheaper than offline.

Discarding an existing plan for an online plan – when it works

If you are looking for a term cover at a lower rate, go for an online plan. However, keep the following factors in mind:

  • Age

    It makes sense for you to make the switch at an early age. Ravi found a cheaper term plan online because he was 28 years old. Had he been older, the online plan would perhaps have been more expensive than his existing term plan. So the switch ideally works when you are younger.

  • Comfort with digitalisation

    You also need to make the switch at a time when you are comfortable with the digital space. The online term plans will work in your favour only when you understand how the internet works. If you are not comfortable with using the digital space, it would not make much sense for you to discard your existing term plan for an online alternative.

Discarding an existing plan for an online plan – when it does not work

There are however certain situations when the switch doesn’t work. Some of them are

  • Health condition

     If you have recently developed a health condition, either due to your lifestyle choices or due to age factors, it would not be advisable for you to discard your existing term plan. This is because a new term plan, even if it is online, would cost you a lot more with the changes in your health. Stick to the old plan at the existing cost as that would definitely be a more profitable option for you.

  • Knowledge of insurance

    If you have a poor knowledge of insurance, i.e. you don’t quite understand how the term plans work or can’t handle renewals and claims, stick to an offline plan. You may then need the constant assistance of your insurance agent to help you out at every stage. The online plans, though cheaper, make you fend for yourself. This is not always a good idea for a person with limited knowledge about the term insurance plans.

The bottom line

You have to assess your life situations, your skill sets and your understanding of insurance. This will help you decide whether or not you should discard your existing term plan for a cheaper online alternative. If the results are favourable, make the switch right away. The end target should be to have a term plan at a lower cost. The plan, whether online or offline, should meet this target.

Know more about term plans