Why are some term plans so cheap? Like Argon, compared to HDFC life. Is there a catch?

Aegon Life*

Deepak,

Insurance is a contract that clearly lays down terms & conditions. No catch. One just has to carefully read the policy wordings & understand them well before buying an insurance policy. You also get a 15 to 30 days free-look period from the date of receipt of policy papers (depending on the product & method of purchase) to satisfy yourself about the coverage you have bought.

Premiums can be a function of the following -

1) Product coverages & other benefits offered - there is lot of innovation in term insurance these days. One has to really delve deep in order to understand the differences between otherwise similar looking products.

2) Insurer's cost structure (Overheads, reinsurance costs, their claims experience in the past, etc)

3) Strategic importance of a product - sometimes Insurers may offer a high demand product at lower margins to acquire more new customers that can be cross-sold other products later. This is usually done when the Insurer expects significantly higher volumes as a result of lower prices.

4) Insurer's perception of risk - Most Insurers in India use the same mortality & morbidity tables so the chances of much variation here are less.

Pricing in Insurance is a vast (and most important) subject. It is dealt with by Actuaries. I have tried to explain it in simple terms. However, you'll do well to talk to an actuary for more understanding.

Best Wishes,

Asad Akbar