One of the major reasons why many people prefer buying term insurance over other types of life insurance policies is because it has the lowest premium. However, the premium amount is set to become expensive soon. Read on to know why?
If you are planning to buy a term insurance policy, it is advisable to buy it as soon as you can, as the prices are expected to increase. According to industry experts, it is speculated that the prices of the term plans are likely to go up by up to 20%. It is a massive increase given the fact that the term plans are always known to be the cheapest form of life insurance policy in the market.
The percentage of the price rise may differ from one insurance company to the other and their plans’ rate may go up based on their features. As such, the critical factors like gender, age, income, etc. will affect the term plan premium rates. One of the critical reasons cited by many insurance company owners and industry experts for the increasing price is because of the increased claim incidence in 2020 due to the COVID-19 pandemic and the co-morbidities among individual.
Since the onset of the COVID-19 pandemic, it is no doubt that the mortality rate among the COVID-19 affected have been high, and it continues to increase in the purview of the second wave of the infection spread. Consequently, the insurance companies in India have received thousands of claim requests. The insurers cite that the increase claim settlements have forced them to increase the premium rates, especially for the pure protection plans like term insurance.
Since the life insurance companies get their policies reinsured, the increased premium rates by the reinsurer has put a heavy strain on life insurers too. Thus, the prices of the life insurance policies are expected to increase in financial year 2022. This means, as an insurance buyer, you must be ready to loosen the strings of your wallet and pay for the term insurance cover.
Depending on the insurance company you choose, you may have to pay 10% to 15% more. Many reinsurers have already increased the premium rates at the start of 2021 and others are expected to follow suit soon.
Last year, in 2020, the insurance companies had increased the basic term insurance rates by 25% to 30% following the high claim volume because of the high mortality rates due to COVID-19. They were unable to sustain at the rate at which they operated as the mortality risk had gone up. Now, as the reinsurers have revised their premium rates, the life insurance companies are likely to increase the premium of the term plans again as it can be challenging them for to underwrite the lives at the prevailing rates.
Some experts opine that over the years, owing to the stiff competition among the insurance companies, the base premium rates for terms plans was significantly lower. Not to mention, the insurers faced immense pressure from insurance intermediaries and web aggregators. However, as the customer base for these plans increased, there has been a conspicuous deterioration in the mortality rates versus the prices of these plans.
Final Word
Now that you are aware of the fact the prices of terms plans are likely to increase, make sure that you purchase a life cover for your family and ensure financial protection to them during the uncertain times like COVID-19. Having a term plan would give a massive relief knowing that your family’s financial future is secured.
