Edelweiss Tokio launches India's first insurance that can be bought at PoS

A combination of term insurance and PPF/equity mutual funds will work better for most others

The country's first, and perhaps the simplest life insurance product that can be bought at a point of sale (PoS) has finally been launched. Edelweiss Tokio Life Insurance has recently launched PoS Saral Nivesh -- the first product to be approved by the Insurance Regulatory and Development Authority of India's (IRDAI) guidelines on point of sale-life insurance products.

PoS Saral Nivesh is a non-linked, non-participating endowment life insurance plan which offers both protection and saving. The benefits are guaranteed and are payable in case of maturity or death, whichever is earlier. The sum assured ranges from Rs 50,000 to Rs 10 lakh. Customers can choose any sum assured in between in multiples of Rs 10,000. The policy tenure ranges from 10 to 20 years. The premium payment terms are five, seven, 10 and 12 years.

An important aspect of this product is its simplicity. "The key condition that IRDAI has laid down in its guidelines is that the product should be simple to buy and simple to understand. The customer needs to know only three things before he decides to buy the product: How much money will he need to fulfil his goal? After how many years will he need the money? And how long can he pay for it?" says Subhrajit Mukhopadhyay, chief and appointed actuary, Edelweiss Tokio Life Insurance. He further adds: "There is no ambiguity about the product. Everything is stated upfront."

The product is also simple to buy. "Along with the verifications, the product can be accepted within 20 minutes. We decide immediately whether to accept or reject the proposal," says Mukhopadhyay. In a normal endowment product, customers have to sometimes undergo medical checkups. They also have to answer a detailed questionnaire on their medical condition. Here, only four questions about medical condition have to be answered. (Also read)

The policy comes with a waiting period of 90 days. If death occurs during the waiting period due to natural causes, 100 per cent premium is paid. If, however, the death is because of an accident, the sum assured will be paid. 

On the positive side, the product is simple and easy to understand, and also easy to purchase. It also offers a guaranteed return. However, its main shortcoming is the rate of return. "While the return is guaranteed and the product offers life cover as well, one must consider whether the return is reasonable. The benefit illustration indicates a return of close to five per cent," says Arvind Laddha, deputy chief executive officer, JLT Independent Insurance Brokers. According to him, while the return may seem low, it must be remembered that it is tax-free and the product is for 10-20 years, during which period the returns from other saving products are likely to come down. "Customers looking for a safe, guaranteed return life insurance product may go for it. It is suited for those who are relatively risk averse and are in the initial stages of building their investment and insurance portfolio," says Laddha. (Also read)

Those not looking for guaranteed returns may avoid this product. "Risk-averse investors should go for a combination of term insurance and Public Provident Fund (PPF) while those who have the requisite risk appetite should opt for term insurance and equity mutual funds," says Deepesh Raghaw, founder, PersonalFinancePlan.in, a Sebi-registered investment advisor (RIA).

For those who decide to buy the product, there are a couple of caveats. The declarations made at the time of purchase should be accurate and complete. "The insurer is likely to investigate deaths that happen within a year or so of the policy being issued to check for possibilities of moral hazard," says Laddha. (Also read)