Look into the charge structure while buying Ulips online

Customes are increasingly using the online platform for buying insurance policies these days. Websites are equipped to help policy holders compare premiums and do various permutations and combinations to choose the required policy. Policies other than traditional ones like Unit Linked Insurance Plans (Ulips) are also opening up to the online space.

Investors looking at Ulips as an option can buy them from the online platform at a low cost. “Online plans generally tend to reduce distribution costs, resulting in lower costs for customers. In the case of Ulips this means that the amount invested is maximised, thus increasing overall returns. This is the primary reason people go in for online Ulips,” says Yateesh Srivastava, chief marketing officer, Aegon Religare Life Insurance Company.
Ulips are insurance contracts which invest in both equity and debt instruments, so both investment and protection goals of customers are attained.

Lower costs and a smooth process are other advantages of buying a policy online. Once the customers choose the product, they need to fill the online proposal form and get the e-policy issued. As per a survey, 44% of consumers refer to online insurance aggregators sites as their first source at the time of purchase.

“As per our studies, 91% of the consumers who visit insurance aggregators’ platforms and buy insurance have felt that they saved on their insurance premium. 77% of these consumers have saved more than 50% on their premium,” says Akshay Mehrotra, chief marketing officer, Policy Bazaar.com.

Post September 2010, after the regulator came up with a revised set of regulations to protect the interest of policy holders, Ulips have become more beneficial for the customers. After the regulations came into effect, most life insurance agents stopped distributing these policies due to lower commissions . This may be the reason that Ulips entered into online space.

There are many factors that need to be taken into account while choosing an online Ulip.
“People choosing an online Ulip should keep a watch on the spread between the gross yield and net yield. Once investors opt for it, they should not discontinue it as they could lose out when it is transferred to the discontinuation fund,” says Rituraj Bhattacharya, head of product and development & market management, Bajaj Allianz Life Insurance.

While considering online platform for buying Ulips, customers should be well conversant with the particular insurance product. It is vital for them to understand the charges involved. Benefit illustrations which come with the buying process helps to compare the charge structure of two Ulips. As there are agents and other distribution channels involved if the investor opts for the offline platform, they would advise customers and give them an overview about the products they are buying. But investors opting for the online platform would need to gather as much information as they can.

Ulips are long term saving instruments. People should keep that in mind while selecting premium payment term, policy term and the total premium per year.There should be full transparency in revealing all personal details as well as medical history of the policy holders.

Allocation charges and impact on maturity figures of some products available online as against offline plans can be seen in the table, taking premium of Rs 1 lakh, 15 year policy term and PPT for a 50 year old male.

Add-on benefits and riders should be selected with utmost care in both in online as well as offline platforms. Those benefits should be chosen according to the requirement. Popular riders include accident death benefit and accident disability benefit.