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Due to the unpredictability of life, it is often difficult to foresee what the future holds. Individuals starting a family need to ensure that their spouse, children, parents and other family members remain financially secure, even if some unfortunate event occurs to the individuals.
For instance, a sudden disease may cut short your remaining lifespan, leaving your family stranded without any means of livelihood.
Life insurance policies or more specifically, term insurance plans safeguard your loved ones against just such events. These policies provide a sizable compensation to your family members in the event of your demise.
With this death benefit, people in your family can move on with their life, without facing financial shortfalls.
Term insurance plans are specific types of life insurance policies where the death benefit is the sole advantage.
Unlike many other life insurance plans where policyholders can claim a substantial return on an investment after the policy tenure ends, term insurance offers no such additional benefit.
One can claim such a policy only if the insured individual passes away due to natural circumstances during the tenure of such a plan.
However, if the death occurs after the tenure runs out, nominees cannot claim any financial compensation from the insurer.
The primary benefit of a term insurance plan is the lower premiums linked with them. Additionally, the death benefit amount related to such a policy is significant vis-à-vis most other types of life insurance policies. Additional benefits include:
Aggregator is an online insurance website that assists clients in locating insurance products from the insurance service providers. It offers details about several types of insurance to its users. It helps clients compare policies existing for the same, based on coverage, premiums, and so on, but offers little assistance in post-sales services.
On the other hand, a term insurer is an insurance company that deals with term insurance contracts with tenors that have coverage during a specified time. The policies are sold by term insurers directly to customers either online through the insurer’s website or agents. The benefits of transacting directly with the term insurer include direct contact/interactions.
Nonetheless, there are time-consuming constraints, time spent manually comparing a policy of different Insurers, and an additional cost since a policy purchased directly from the Insurers can be more expensive than the aggregator.
The term insurance market in India is part of the broader life insurance sector and is projected to reach a valuation of USD 1,058.08 billion in 2023. The market is expected to grow at a compound annual growth rate (CAGR) of 8.9% from 2024 to 2030, reflecting the increasing demand for financial protection among Indian consumers.
Term life insurance covers a specific period, such as 10, 20, or 30 years. Unlike whole life insurance, which requires lifetime payments, term life insurance is temporary and more affordable. Due to its simplicity and cost-effectiveness, it has surged in popularity, especially among younger generations like Millennials and Gen Z.
In 2024, term policies comprised a significant portion of new life insurance sales, driven by the industry's focus on digital engagement and simplified policy information. This trend is expected to continue, further boosting the market growth of term life insurance.
Digital transformation is boosting the insurance market by making operations more efficient and improving customer experiences. However, it also brings challenges. A survey in February 2023 found that 60% of consumers prefer to communicate with insurance companies online. While this trend is driving market growth, insurers must quickly adopt new technologies to meet these digital demands and stay competitive.
The adoption of smart solutions like artificial intelligence (AI) and big data analytics is expected to significantly enhance operational efficiency and reduce costs, making term insurance more affordable. Governments are also promoting financial literacy and insurance-related programs, which should further drive market growth.
The legal framework governing term insurance in India is primarily regulated by the Insurance Regulatory and Development Authority of India (IRDAI). The key legislations include the Insurance Act of 1938 and the Insurance Regulatory and Development Authority Act of 1999.
Recent updates include the IRDAI (Unit Linked Insurance Products) Regulations 2019 and the IRDAI (Non-Linked Insurance Products) Regulations 2019, which set revised norms for designing and issuing life insurance policies.
Additionally, the Insurance (Amendment) Act of 2021 increased the foreign direct investment limit in Indian insurance companies to 74%, reflecting the sector's evolving regulatory landscape.
The Insurance Regulatory and Development Authority of India (IRDAI) has introduced several new rules to enhance the term insurance landscape in India. Key updates include:
As per the directive of the IRDAI, it is necessary to introduce standard-term insurance products to reduce consumer profiles. These are quantifiable, which implies that they have similar attributes and benefits in all the insurance companies so that the policyholder can differentiate between one policy and the other.
Policyholders used to have little knowledge of the policy terms, conditions and exceptions, but through the changes in regulation/, insurance companies are required to provide more information.
The IRDAI has also advised all insurers to move from conventional approaches to selling insurance policies and their management through an online framework. This includes such nuances as e-KYC (Know Your Customer) procedures and digital signatures for transactions or enhancing business processes and customers’ expectations.
What used to be implemented in the past is now slowly replaced by new measures, which would allow for the immediate disposal of liabilities. In this context, there are many predicted time spans through which the insurance providers are expected to pay the claims, and if they do not do so, they are penalised.
The Insurance (Amendment) Act 2021 has again increased the FDI cap of Indian insurance entities up to 74%. This event will introduce more capital as well as efficiency into the Indian insurance market.
The Insurance Regulatory and Development Authority of India (IRDAI) has introduced rules to reduce penalties for policyholders who exit their policies prematurely. This means if you decide to surrender your policy early, the financial penalties will be less severe.
The new rules focus on speeding up the claim settlement process. Insurers are now required to settle death claims within 15 days, provided no investigation is needed. This aims to provide quicker financial relief to beneficiaries.
The free look period, which allows policyholders to review and cancel their policy without any penalties, has been extended from 15 to 30 days. This gives policyholders more time to evaluate their policy terms and make an informed decision.
When choosing a term insurance company, it's essential to consider several factors to ensure you get the best coverage for your needs. Consider these key factors:
Buying term insurance directly from insurance providers offers several advantages:
Digit offers fairly standard premium rates with term insurance, making it easier and cheaper for many people to get an insurance policy.
We emphasise a hassle-free and transparent buying process. Their digital platform lets you easily compare, purchase, and manage your policy online.
Digit has a good record of settling its claims, which means your claims will be processed quickly and without a hitch.
At Digit, you will find different term insurance policies, and we have options for customisation to add on to the options including riders for critical illness, accidental death, and more, to enhance coverage.
We have accessible customer service support to help you as a client if you have a question or problem.
Digit has Incorporated efficient technologies to enhance the functionality of the business and customers and include AI in the claims.
Understand the difference between insurance companies, aggregators and brokers.
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