Life Insurance Corporation launches online term plan

It was for long that Life Insurance Corporation (LIC) stayed away from joining the bandwagon of online term plans. But after a long wait, the country's largest insurer has finally joined the club.

Term insurance plans are pure protection plans where sum assured is paid on the death of a policyholder, with no benefits to be paid on maturity of a policy.

They are much cheaper when bought online as no commission has to be paid to agents.

For LIC's e-Term the minimum entry age is 18 years. The maximum limit is 60 years. The policy tenure cannot be less than 10 years and more than 35 years.  The minimum sum assured is Rs 50 lakh for non-smoker category and Rs 25 lakh* for the rest. The policy ceases to cover you after 75 years.

LIC's plan is, however, costly compared with online term plan of other private insurers.

Consider this: For a 35-year-old male, non-smoker, LIC offers a cover of Rs 1 crore for Rs 20,112 for a term of 25 years. The same cover by Max Life is offered for less than Rs 9500, a difference of more than 100 per cent.

Claim settlement ratio of LIC is, however, better than private life insurers at 97.73 per cent. According to the latest annual report for private insurers, the settlement ratio had gone down to 88.65 per cent during 2012-2013 compared to 89.34 per cent during the previous year.

Experts say online term plans is one of the fastest growing segments in the life insurance industry and insurers need to leverage this opportunity.

According to a report by Boston Consulting Group and Google India, it is estimated that three in every four insurance policies sold by 2020 would be influenced by digital channels. The report also states that insurance sales from online channels will grow 20 times by 2020, and overall Internet influenced sales would be Rs300-400,000 crore.

(*An earlier version of the story had incorrectly mentioned the minimum sum assured as Rs 25,000)