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Suresh Parthasarathy

Mumbai, Sept. 2 Premia charged for term insurance policies are likely to decline sharply with the Insurance Regulatory Development Authority (IRDA) reducing the solvency margin required for insurance players to sell pure risk policies. The first player to take up the gauntlet is Kotak Mahindra Old Mutual Life Insurance, which has effected a 12-40 per cent reduction in its term plan premia. Many other players are expected to follow suit. Term Insurance is an insurance policy taken purely to cover risk, with no frills added.

Kotak Life has slashed term insurance premia by anywhere between 12 and 40 per cent, depending upon the age and sum assured, following this regulatory change. A 40-year old male seeking a cover for a sum of Rs 10 lakh for 10 years had to pay annual premium of Rs 5,892 under the old rates. He now has to pay only Rs 3,516, that is 40 per cent less, under the new rate.

However, premiums have not been slashed to the same extent for larger sums assured. A cover of Rs 1 crore for a 30 year old male for a 20-year period, for instance has the premium reduced only by 13 per cent, from Rs 23,052 a year to Rs 1,9992.

While older players are looking at slashing premia, new players such as Aegon Religare Life Insurance have already launched their term insurance products at substantial discounts to the existing market price.

With the new regulation in place, more players may prune the premium in the days ahead. So it may be best to shop around before finalising term policy.

More Stories on : Life Insurance

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