Who should buy the Standard Term Plan - Saral Jeevan Bima?
The Insurance regulator IRDAI announced that every life insurer must offer a standard term life insurance policy from January 1st, 2021, called the Saral Jeevan Bima.
How good are these plans? Should you wait for the launch? Would they be cheaper or better than the regular term insurance plans available right now - All this and more answered here in detail. Jump right in.
How does the Saral Jeevan Bima work?
Saral Jeevan Bima works exactly like a term life insurance plan - provides a death benefit to your family - If you die during the duration of the cover (policy term), your nominee is paid the cover amount (sum assured) in the policy.
The only exceptions when the policy will not pay:
- Death due to suicide in the first year
- Death due to sickness during the first 45 days after the policy is in force.
What are the standardized features across insurers:
Being a standard plan, the product provides the most basic features on offer. Here is a summary of features/customizations available in this plan and their comparison to features available across regular term life plans.
Note: The features in the column 'Regular term plans' below are available based on the specific plan you choose. In case you are comparing a specific plan to a Saral Jeevan Bima plan, you should carefully note the features available in that specific plan.
|Saral Jeevan Bima||Regular term plans|
|Sum Assured options||Min 5 Lakhs - Max 25 Lakhs||Min 25 lakhs - No maximum limit (Based on underwriting)|
|Policy start age||Min 18 years - Max 65 years||Min 18 years - Max 65 years|
|Term period||Min 5 years - Max 40 years||Min 10 years - Max 50 years|
|Maximum maturity age||70 years||More than 70 years available. Depends on the insurance plan.|
|Premium pay model||Single premium, limited pay, regular pay options||Single premium, limited pay, regular pay options available based on plan|
|Payment modes||Yearly, half-yearly, monthly||Yearly, half-yearly, quarterly, monthly|
|Maturity Benefit||No maturity benefit||No maturity benefit|
|Eligibility Filters||No restrictions based on education, occupation, income or place of residence.||Education: Should be at least graduate/ diploma holder|
Income: At least 3 lakhs per annum
Location: Every insurer only covers a specific list of locations
|Initial Waiting Period||45 days (except in accidental death)||No waiting period|
|Payout Options||Only lumpsum payout||Lumpsum, monthly income and a combination of lumpsum+income options|
|Riders||Accidental death & Accidental disability riders||Several riders are available based on plan - some of which include - Critical Illness Rider, Accidental Death Rider, Accidental Disability Rider, Waiver of premium on Accidental Disability/ Critical Illness etc|
How should you compare Saral Jeevan Bima policies offered by different insurers?
- While a majority of the features are standardized, the premiums across policies will of course vary.
- Maximum coverage limits may also be different from insurer to insurer. Ensure you do a detailed calculation of the amount of cover your family will need, and only then pick a policy that gives you that amount (or the maximum possible amount you can afford).
- Apart from the above, the comparison will be on the service capabilities and brand perception you have about the product.
Here's a quick cost comparison of the premiums of Saral Jeevan Bima launched by Edelweiss and their regular term insurance plans.
|Cover upto age||ETL Saral Jeevan Bima Premium (INR) (Cover: 25 Lakhs)||ETL Zindagi+ Premium (INR) (Cover: 25 Lakhs)||ETL Zindagi+ Premium (INR) (Cover: 1 Crore)|
Premiums have been taken from the insurer's website on January 18, 2021 - for a 30 year old male, non-smoker with a Regular Pay option.
You'll see from the table above that the cost of a Saral Jeevan Bima plan could get close to double the cost of a regular term plan - for the same cover amount.
Saral Jeevan Bima might not be for you.
Accessibility in Insurance and pricing cannot go hand in hand. Insurers can either filter profiles and offer an affordable plan or keep the access open and charge high premiums based on the most undesirable risk/profile (for the insurer).
Insurers have restricted specific profiles, occupations, cities, or income groups from online purchase of term insurance, to keep premiums affordable and claims under control. With Saral Jeevan Bima, insurers cannot restrict the profile or demographics of people who can buy this policy - and hence this will most likely result in much higher premiums.
- Saral Jeevan Bima policy might simply not make economic sense for many of us.
- The policy might not be made available online, you may have to visit the insurer's branch office or contact a (reluctant) agent to buy the policy.
Who is Saral Jeevan Bima ideal for?
This policy makes Term Insurance accessible for people who were earlier not eligible for this policy. You should pick this term insurance policy if you do not fulfil eligibility criteria for other regular term insurance policies as a result of
- Educational qualification less than 12th Standard (Class)
- Income lower than 3 lakhs per year
- Live in a city or town or village that is excluded from regular term plans.
- Occupation (e.g. hazardous occupations) that was excluded from regular term plans.
If you have access to the regular online term plans - this product might not be relevant for you.
While this standardized product will improve access to term insurance to several individuals across educational backgrounds, income levels, and geographies - who couldn’t take a policy before. Plus, as the terms and features are simplified - they can buy a policy with some amount of confidence. It can help several families secure their financial future, in case the primary breadwinner dies early, within the policy term.
Having said that, the limitations in terms of customization and sum assured mean that this policy is not ideal for everyone. It is important to weigh in both the benefits as well as limitations before deciding to buy this policy.
Source: Data published on IRDAI Circular - Guidelines on Standard Individual Term Life Insurance Product, “Saral Jeevan Bima”
- If you were not eligible to buy a term insurance product before due to educational qualification, income level or location - Saral Jeevan Bima is a good opportunity for you
- This policy would be mandatorily be provided by all insurance companies in India soon.
- It's a plain vanilla cover, with minimum customization options available.
- Since it opens up access to everyone the chances of it being expensive are very high.
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