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Term insurance covers will now cost less

business Updated: Sep 11, 2008 21:29 IST
Term insurance covers will now cost less

Investors can now expect a lower rate of premium from insurance companies for their term insurance. Recent developments in the field of insurance have ensured this and investors must make the best of these developments. A lower rate of premium can also lead to possibly higher insurance covers for the same amount or even a lesser amount than what was paid before.

Reason for change
Insurance companies have to maintain what is known as a solvency margin. This margin has been reduced and therefore has freed up the amounts that the insurance companies need to run their business. At the same time many insurance companies have flooded the market in recent years and have the experience of several years in the Indian insurance market behind them. They have observed the behaviour and the position in the market and are now able to put this experience to use in pricing the products.

Selective reduction
In the initial phase only a few companies have reduced the premium. Thus the investor could find that several companies still have the same premium as before. Earlier, many companies had reduced the premium on term policies to such a level that they cannot afford such prices anymore. However, competition is another factor that can lead to more action in the area because it is difficult to remain an island when there is a change happening all around.

Term policies
There will be clear action and impact as far as the term policies are concerned but the same will not be seen for other kinds of policies. Term policies are pure life cover and many of the factors that go into determining the premium have changed. Other policies have an element of savings that will not be similarly affected. For investors, it is important to make use of the opportunities that are ahead as they can get the required insurance cover for their family. This will be a good factor that will help in the planning for the future.