Personal Finance

Will Saral Jeevan Bima be a good term insurance option for you?

Bavadharini KS | Updated on November 01, 2020

IRDAI’s standard term life product will be available across insurers soon. Is it worth it?

In a bid to make the process of purchasing health insurance simpler, the insurance regulator IRDAI introduced a standard health insurance product — Arogya Sanjeevani.

Following this, the regulator also recently provided guidelines for standardisation in the life insurance space, through a standard term life product — Saral Jeevan Bima. All insurers are to launch the product by January 1, 2021. The launch of Saral Jeevan Bima ensures purchase of a term plan is made simple and easy.

About the policy

Saral Jeevan Bima policy is a standard term life cover as per IRDAI requirements.

It is a pure-vanilla term cover which pays the sum assured (SA) in lump-sum to the nominee in case of death of the policyholder during the policy term.

This policy is offered only to individuals aged between 18 and 65 years for a minimum policy term of five years (maximum of 40 years). The plan offers a minimum SA of ₹50,000 and a maximum of ₹25 lakh, in multiples of ₹50,000. However, insurers have the option of offering a higher SA (over ₹25 lakh), too.

We recently covered the details of the product extensively in another article, ‘All you need to know about Saral Jeevan Bima’. Here, we highlight whether or not should you opt for this policy.

Take note

There are three important points to note before you go for Saral Jeevan Bima.

One, it is the most basic term plan which provides level term cover — the premium payment and the life cover you choose remain constant for the policy term.

On the other hand, most policies in the market offer different options for SA.

For instance, LIC’s Tech Term plan gives you the option to choose between a level SA and an increasing SA.

Two, this standard plan offers lump-sum pay-outs to the nominee only upon the death of the policyholder.

But most plans in the market offer staggered pay-out options with an increase in pay-out at a certain percentage every year.

Some policies offer return of premium paid if the policyholder survives maturity.

And lastly, most term plans in the market offer accidental death benefit, partial and permanent disability benefit, and terminal and critical illness riders, in addition to death benefit. Some policies have riders built into them. For instance, SBI Life’s eShield comes with terminal illness cover built into the policy, and offers accidental death and accidental total and permanent disability as riders.

In the case of a standard term plan, only two riders can be offered — accidental death benefit and permanent disability benefit. Even then, it is at the discretion of the insurers.

The ₹25-lakh cover may not be sufficient for everyone. When it comes to term plans, experts generally recommend having a term policy with a death benefit at least 10-20 times your gross yearly income.

You should also consider your personal financial position (your liabilities) to decide your SA, as it will help if your dependants can comfortably settle your outstanding liabilities, if any, in your absence.

While insurers have the option of offering higher SAs on this standard policy, we need to wait and watch as to how many will do so.

Otherwise, with Saral Jeevan Bima, since terms and conditions and pay-outs are the same across insurers, you can select the insurer based on the premium, services offered as well as their claim settlement track record.

To give you an idea, the premium for existing term plans for ₹25 lakh (30-year-old male for 70-year policy term) works out to ₹3,500-8,500 across insurers.

It would work to the benefit of the policyholders if this policy is available through digital platforms as online plans tend to be cheaper.

Currently, the minimum SA of many insurers are higher than that of Saral Jeevan Bima — ₹50 lakh for LIC’s online term plan Tech-Term, and ₹35 lakh for SBI Life’s eShield (if purshased online). If Saral Jeevan Bima is available online, it can come in handy for those looking for a cover for ₹5-25 lakh.

Published on November 01, 2020

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