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Term plans are supposed to be simple products in the life insurance space. But life insurers add different features, pay-out options and other conditions, making the selection of a term plan difficult, prompting the regulator, IRDAI, to come up with Saral Jeevan Bima.
The objective of this standard term policy is to offer simple basic life cover for policyholders across income categories. With a few insurers introducing the standard term policy in their menu, we discuss their offerings.
Cost of the cover
Saral Jeevan Bima is a plain vanilla term cover that pays the sum assured (SA) in lump sum to the nominee in case of death of the policyholder during the policy term. The policy is offered for a minimum SA of ₹50,000, up to a maximum of ₹25 lakh.
According to industry experts, the underwriting process is one of the main factors influencing the pricing of these standard products, given that the coverage is the same across insurers. For instance, Saral Jeevan Bima offered by SBI Life would cost a 30-year old individual — with a sum assured of ₹25 lakh — a premium of ₹12,479 per year. SBI Life requires an individual to undertake a physical medical check-up.
On the other hand, PNB Met Life’s premium for the same cover works out to ₹6,278 per year and doesn’t require any medical assessment. Some insurers offer tele medical facility. For instance, ICICI Pru Life, for the same ₹25-lakh cover (30-year individual), conducts a tele medical check-up before issuing the policy and the premium works to ₹9,428 per year. While medical assessment benefits the policyholder (by reducing the chance of rejection of claim in the future on medical grounds), it bumps up the premium.
The pricing of the policy is not only based on medical assessment but also depends on the income category (whether salaried or self-employed), profession and age. The higher your age, the higher will be your premium.
However, if you compare Saral Jeevan Bima with other term plans in the market, the premium seems high. For instance, the premium for Edelweiss Tokio Life’s term plan Zindagi Plus is ₹4,434 for a ₹25-lakh cover (30-year individual), while that for Saral Jeevan Bima under the same insurer works out to ₹8,259.
According to Indraneel Chatterjee, Co-Founder and Principal Officer, RenewBuy, “The premium for the standard product appears relatively high because the other term planscater to individuals usually in higher income brackets, for whom insurers will be in a position to absorb the underwriting costs and risks, given the higher coverage.” The minimum cover offered by most term policies in the market is over ₹25 lakh whereas for the standard product, the maximum coverage is itself only ₹25 lakh. For instance, in SBI Life’s eShield plan, the minimum cover is ₹35 lakh, with no limit for maximum cover.
Chatterjee further adds, “ Saral Jeevan Bima caters to those in the low and mid-income category, mostly self-employed, which explains the stark difference in the premium, though the on-boarding process is simple.”
Our take
You can consider this standard term plan for basic protection if you are self-employed or belong to a lower income category.(say, earning less than ₹5 lakh a year)
Though most insurers offer term plan for a minimum cover of ₹30 lakh, a few do offer SA starting at ₹25 lakh, including Max Life, PNB Met Life, Kotak Life and Aegon Life. Then in such cases, it makes sense to compare premium offered by other term plans by the insurer for more or less the same or additional cover.
But remember, as a general rule, it is good to have a cover that is at least 10-25 times your annual income. This should also be reviewed periodically, as and when your income and liabilities increase.
Although two riders — accident death and permanent disability benefit — can be offered with the standard cover, so far, no insurers have offered these.
So, all things considered, do compare the coverage, riders and other features of different offers before signing up a term policy.
For a detailed analysis of Saral Jeevan Bima, look up All you wanted to know about Saral Jeevan Bima (https://tinyurl.com/Saralbima)
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