Edelweiss Tokio Life Insurance (ETLI), a relatively new kid on the block in the Indian Life Insurance space, launched an online term plan called "TotalSecure+" in September last year. How well does it fare against its more established peers? Let's find out.
TotalSecure+ is a pure term insurance plan with no maturity benefits - in effect, the best kind of insurance plan. It has no relevance from an investment standpoint, and its dynamics are easy to understand. You pay a fixed premium each year for a fixed number of years (or a onetime premium) and receive a fixed quantum of life cover for a fixed term in lieu of your premia. In case of an unfortunate eventuality, your dependants receive the death benefit.
Since the product is offered online through ETLI's portal, it has a lower cost structure as commissions are in effect, eliminated. This cost saving benefit is passed on to customers, making the plan affordable. One can opt for the plain vanilla version without riders, or choose from one of two rider options (basic and comprehensive).
The high degree of customizability certainly works in the product's favour. TotalSecure+ allows you to customize your premium paying term, mode of pay out of the death benefit (as a lumpsum or as regular income. You also get to choose the type of rider you'd like to strap on.
Customers are advised to choose the lumpsum benefit option rather than the regular income option), as this money could be invested in a portfolio of instruments that could potentially generate higher returns than the regular income option would provide.
Health Cover - a smart rider
In a universe of insurance and investment products replete with nugatory features, the "Health Cover" rider comes across as a breath of fresh air. Put simply, the rider (at an additional cost) allows for an accelerated pay out of a part of the death benefit even when the insured person is alive, if he or she is diagnosed with a critical illness. The accelerated rider amount isn't over and above the death benefit, but a part of it. For instance, if the rider amount is Rs. 10 lakh and the death benefit is Rs. 1 crore, Rs. 10 lakh is paid out upon diagnosis of the critical illness, and the death benefit falls to Rs. 90 lakh therein.
Customers can choose between a "basic" and "comprehensive" health cover. The basic option covers 7 illnesses whereas the comprehensive option covers 35 illnesses. For a Rs. 1 crore cover/ 10 lakh health cover for a 33-year-old, male non-smoker, the basic health cover comes at an additional price of roughly Rs. 2,500 per annum; the comprehensive one at Rs. 4,000 per annum. Opting for the comprehensive health cover seems to be a smart choice, given the negligible cost differential.
At Rs. 9,180 per annum, the premium amount for a 1 crore cover/ 30-year policy term for a male, 33-year-old non-smoker (no frills) is low. Throw in the health cover options and the premium rises to Rs. 11,685 and Rs. 13,164 for the basic and comprehensive options, respectively. In comparison, the annual premium for LIC's e-Term is roughly Rs. 27,500 per annum under the same set of parameters - and this is minus the health cover benefit. On paper, the policy is indeed extremely affordable and cost effective.
ETLI's Claim Settlement Ratio - a concern
IRDA publishes "Claim Settlement Ratio" (CSR) data on their portal every year. This critical information bucket summarizes the percentage of individual death claims that are actually settled by the insurer. No prizes for guessing that this is very important data - after all, what's the point of taking term insurance if your death claim won't result in a pay out to your nominee during the worst possible crisis (the loss of life of the primary breadwinner in the family)?
According to IRDA's latest data for 2015-16, ETLI ranked 17th among the 24 Life Insurers on CSR for individual death claims, with a settlement ratio of 85.11 per cent. What this effectively means is that there's a 1 in 6 chance that with an Edelweiss Tokio policy, your policy's death claim will be rejected. Compare this with LIC's stellar CSR of 98.33 per cent, and the higher premium amount for LIC's e-Term suddenly appears justified.
Admittedly, this number may be an aberration due to the low sample size involved (Edelweiss Tokio received only 141 death claims last year compared to LIC's 7.6 lakh!). There's a good chance that the insurer's CSR number will increase steadily with each passing year before settling somewhere in the mid-90 per cent's. However, ETLI's present-day CSR number of 85.11 per cent surely poses a deep concern.
The policy is well-designed and well thought out, and the premiums are low. However, ETLI's poor CSR number is a dampener. For your term insurance needs, stick with a more established Life Insurer with a 95 per cent-plus CSR for now. The policy is great on paper - revisit it in a couple of years and take your decision considering ETLI's CSR trend at the time.
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