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The right way of choosing a Saral Jeevan Bima plan

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NEW DELHI:After a long wait, life insurers in India have started to roll out regulator-mandated standard term insurance plan, Saral Jeevan Bima. To help individuals select the right term product, the Insurance Regulatory and Development Authority of India (Irdai) had asked all life insurers to launch these plans from 1 January, 2021 with simple features as well as standard terms and conditions.

The minimum sum assured offered is Rs5 lakh, which could be extended up to Rs25 lakh in multiples of Rs50,000.

However, product launches were delayed as the regulator and the companies were in discussion over the flexibility in terms of maximum sum assured and the pricing.

As of now, six life insurance companies, including the Life Insurance Corporation of India, are marketing offer this product.

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Saral Jeevan Bima plans.

As the features as well as terms and conditions of Saral Jeevan Bima are same across insurers, the key differentiator is premium pricing. However, according to experts, going solely by the premium is one of the biggest mistakes an individual can make while choosing this plan.

“This plan provides a higher issuance rate for the lower-income segment groups compared with the other term plans available. While the features of the Saral Jeevan Bima plan are similar across insurers, customer should look at claim settlement ratio,” said Santosh Agarwal, chief business officer, life insurance, Policybazaar.com.

The death claim settlement ratio is defined as the percentage of insurance claims settled by an insurer compared to the total number of claims received. For example, if this ratio is 99%, it means that the insurer has settled (paid sum assured to the beneficiary) 99 death insurance claims out of every 100 insurance death claims received.

Moreover, Agarwal suggests that individuals should also look at ease of on-boarding as well as the insurer’s after-sales support and service, including renewal of the insurers, before choosing a plan.

According to experts, the pricing of the Saral Jeevan Bima is much higher compared with the regular term plans as insurers are not allowed put filters in these products.

Edelweiss Tokio Life Insurance Co. Ltd was the first insurer to launch the Saral Jeevan Bima plan in January. At an annual premium of Rs13,605, including taxes, the company’s standard term plan was priced more than twice its regular term plan at Rs6,464. The pricing is for a 40-year-old non-smoker male and a sum assured of Rs25 lakh.

Moreover, the Saral Jeevan Bima plan by LIC costs Rs18,704. While the public life insurer doesn’t sell a cover with sum assured of Rs25 lakh under its regular term plan, the Rs35 lakh cover costs around Rs8,000 annually.

Max Life Insurance Co Ltd, which is the latest entrant in Saral Jeevan Bima business, has priced its product at around 12,000 for a 25-year-old non-smoker male and a sum assured of 25 lakh.

The pricing of these plans is also higher as companies expect that the Saral Jeevan Bima will be bought by segments where mortality experience is likely higher.

However, the Saral Jeevan Bima has made it easier for people who are less educated or have low-income profile to buy a term insurance plan. Also, it has introduced term plans as low as Rs5 lakh in the market.

Keep in mind that an individual with good educational qualification and job would find regular term insurance plans cheaper than the Saral Jeevan Bima.

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