AEGON Religare Term Insurance Plan is a new product with inbuilt accidental death cover and optional double death benefit at an additional premium. Does the insured really need both these features? Understand pros and cons
AEGON Religare Life Insurance (ARLI) launched a term plan called the “Term Insurance Plan”. The product is touted as “innovative term plan”, but its name is unimaginative. It is worth exploring the new product features of inbuilt Accidental Death (AD) and optional double death benefit at an additional premium. How does the product compare with the existing ARLI iTerm, which was recently revised for pricing?
ARLI Term Insurance Plan is a term plan which provides a choice of two death benefit options: Option-1 pays out the entire Sum Assured (SA) on death of the insured. Option-2 pays out half of the SA on death of the insured. Thereafter, it pays out 3% of the SA, every month, for a period of five years, making a total payout of 230% of the SA. Both options have an in-built AD cover, equal to that of the SA.
The minimum age of entry is 20 years and the maximum is 65 years. The maximum age at maturity is 75 years and the minimum SA is Rs10 lakh. The policy term options are 10, 15, 20, 25, 30, 35, 40 years or cover up to 75 years of age. The premium payment term is equal to the policy term.
1. Policy term up to 75 years minus entry age is a good feature. E.g. For a person of age 25 years, the policy term can be 50 years. It helps to ensure that the policy does not get over at a time when it is difficult to get another policy.
2. Option-2 is good for someone wanting regular flow of money instead of getting lump-sum of full SA on death of the insured. It ensures that the insurance money is not misused after a big payout. Getting 230% of the SA is an excellent option if you need high insurance cover even though salary is limited. E.g. A person earning Rs5 lakh usually gets term plan of Rs50 lakh SA. With option-2, the insured will be assured of 230% = Rs1.15 crore cover. It is to be seen how much cover one can really get in this policy based on their salary. It depends on ARLI underwriting.
3. It gives an option to add three riders:
a. Critical Illness rider that covers nine illnesses.
b. Woman Care rider that covers illnesses pertaining to women.
c. Total and Permanent Disability rider that covers permanent disability.
Enforcing the inbuilt AD cover does come at a price. It also forces the AD cover along with the life insurance cover. You may not want such an arrangement or such high AD cover. E.g. For a 27 year old, non-smoker from Mumbai buying ARLI iTerm for policy term of 48 years and SA of Rs50 lakh, the premium (including taxes) is Rs4,663.
The premium for ARLI Term Insurance Plan is Rs10,169. It means Rs5,506 (10,169 minus 4,663) may be going toward AD cover of Rs50 lakh. It is high considering that Personal Accident covering AD as well as Permanent Total and Partial Disability for Rs50 lakh will cost Rs5,000 or less. The difference could also be due to iTerm being a pure online plan while Term Insurance Plan is an offline plan.
1. Option-2 payout of 230% comes at a price. The Term Insurance Plan premium for above example will be Rs16,854. It is on higher side. Again, it could be due to offline nature of the plan.