A direct insurance plan, also known as a direct-to-consumer plan, is a type of insurance policy that can be purchased directly from the insurance company online without the need for an agent or broker. By visiting the insurance company’s website, policyholders can easily purchase the desired coverage.
In today’s digital age, many insurance companies provide online portals for customers to directly purchase policies and file claims. This eliminates the need for intermediaries, resulting in a more streamlined process.
It’s worth noting, however, that purchasing insurance through a third-party portal may not be covered under the direct insurance plan.
According to Rakesh Goyal, Director of Probus Insurance, “When buying directly, one is more likely to purchase a term plan. It’s easy to access, you can go to the insurance company’s website, enter your details, and almost instantly get an insurance policy.”
Let’s explore the pros and cons of direct insurance plans in more detail.
Benefits of Direct Plan
A direct insurance plan is similar to a direct mutual fund plan, as it allows you to invest directly in the scheme without going through a distributor or agent. This can lead to a lower cost ratio, as distribution costs and fees are eliminated.
With a direct insurance plan, policyholders have the freedom to purchase coverage at their own convenience without the pressure of paperwork or payments from intermediaries. There are several advantages to buying a direct insurance plan, including convenience, speed, and the ability to personalize coverage.
As Rakesh Goyal, Director of Probus Insurance, points out, “Purchasing online policies is very convenient as people can sit in the comfort of their own home and personalize their policies, such as buying additional riders or adding personal accident coverage. Additionally, one of the main benefits of buying insurance directly is that there is often no medical examination required.”
Furthermore, direct plans can also provide cost benefits. According to Abhishek Bondia, Managing Director and CEO of SecureNow.in, direct plans may come with no built-in fees and therefore the premium may be cheaper than traditional insurance purchase methods. He states, “With the life insurance plan, the difference between the traditional plan and the direct plan can be about 3% of the annual premium.”
Experts say that direct plans are particularly common for term life insurance policies.
The appeal of purchasing insurance through a broker is the ability to offer a wide range of options. Policyholders can choose from different premiums, exclusions, and claims ratios before committing to a policy. Additionally, brokers work on behalf of the policyholder, not the insurance company.
Making changes to your policy is also easier with a broker. They offer a wider range of options and can be a helpful resource for billing and document submission.
However, direct insurance plans have a lower cost ratio as they do not involve an intermediary, giving policyholders the freedom to purchase according to their convenience and availability.
Ultimately, the choice between purchasing through a broker or directly depends on the policyholder’s level of understanding and risk-taking ability. If the policyholder has a good knowledge of the insurance company and its plans and is comfortable with the billing process, they may prefer to go directly. On the other hand, if they are new to insurance and need guidance, going through a traditional purchasing process may be a better choice.