Pure Term Insurance Cover Mart Heating Up

The heat is on in the term insurance product market with the Life Insurance Corporation of India (LIC) having joined the band wagon with its pure term insurance cover -- Anmol Jivan -- being launched on July 30.

LIC is offering a competitive price for those in the age group of 30 and below. But those in the age bracket of 35 plus, they would do better to opt for term life cover offered by the new players -- ICICI Prudential Life Insurance or HDFC Standard Life Insurance.

A 30-year old taking out a 10-year term cover of Rs 10 lakh will pay Rs 2,100 per annum under LIC's Anmol Jivan. This is 34 per cent cheaper than HDFC Standard Life's term product where he would pay a premium of Rs 2,820.

For a 20-year term, the difference in premium rates is marginal: LIC's Rs 2,900 against HDFC Standard Life's Rs 2,920. LIC has restricted its offering to Rs 5 lakh and Rs 10 lakh sum assured.

"As the organisation is on a high-risk, we cannot offer the product for smaller amounts," said LIC managing director N C Sharma.

For those in the higher age bracket of 35 and above opting for a term cover of Rs 10 lakh, ICICI Prudential works out the cheapest under a shorter term of 10 years, while HDFC Standard Life is marginally cheaper in a longer term period of 20 years.

For instance, a 45-year old taking a Rs 10-lakh 10-year term cover would pay approximately Rs 7,450 under LIC's Anmol Jivan, Rs 5,520 for HDFC Standard Life and much less at Rs 5,336 for ICICI Prudential. However, should he opt for a higher term of 20 years, HDFC Standard Life is cheaper at Rs 7,620 against ICICI Prudential's Rs 7,649. LIC does not offer coverage beyond 60 years, hence a 45-year old will not be able to take a 20-year term cover.

HDFC Standard Life and ICICI Prudential have capped the minimum annual premium at Rs 1,500 and Rs 2,400 respectively. "Hence policyholders at younger ages can avail the benefit of higher sum assured or of a longer term," said ICICI Prudential officials.

Term products traditionally the worldover are price sensitive. Term assurance is a pure protection cover, wherein an individual ensures that in the event of his death during the term of cover, his dependents or business partners would be financially taken care of.

However, the success of introducing these products depends largely on volumes. HDFC Standard Life might have shot the first salvo when it slashed its premium rates on term assurance cover by as much as 40 per cent in March. ICICI Prudential tried to better the rates when it announced its product in early July. LIC however, has decided to segment the audience.

It has intentionally gone in for more competitive rates for the younger generation. Its strength in terms of the agency force of 7.92 lakh strong will be no match for any of the new players in terms of gaining volumes.