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Why Do Life Insurance Agents Avoid Selling Term Plans?

While term plans are considered the best and most important form of insurance plans by experts, it also offers low commissions to insurance agents. Read to know more.

  • 4,453 Views | Updated on: May 22, 2024

When it comes to buying an insurance policy, many people in India prefer purchasing the traditional way from their insurance agent. They believe it is better to purchase through an agent as they will understand the features and benefits of different plans and help them choose the right policy.

The work of a life insurance agent is to understand your specific insurance requirements and suggest appropriate plans accordingly. Therefore, if you are a first-time insurance buyer, the agent must recommend buying a term policy. However, in most cases, the agents suggest only the plans that they believe are the ‘best in the market’ and never try to sell a term plan. You may probably believe the agent blindly and end up buying an expensive policy only to regret it later.

If you are wondering why insurance agents avoid selling term plans, here are a few critical reasons.

  • Low premium translates to a lower commission for the agents
  • Remember, an insurance agent only tries to sell a policy that could earn them a high commission. And, when it comes to affordable premiums, term insurance policies have the lowest premium compared to other life insurance policies.

    A term plan has a low premium because it is a pure protection policy and provides only death benefit; you do not get any survival benefit. When you purchase a term plan, you essentially invest in securing your family’s financial future.

    Therefore, term plans offer life cover at a nominal cost. The commission that agents receive from the insurance company is usually a percentage of the premium paid by the policyholder. And, since term plans have a low premium, they receive a lesser commission than other plans. Hence, most insurance agents do not sell term policies to customers.

  • Policy buyers’ attitude about life insurance
  • Another significant reason many insurance agents don’t sell term plans is that most Indian insurance buyers are not interested in buying a policy that does not offer any returns or maturity benefits. Many insurance buyers see insurance as an investment or buy it for tax-saving purposes rather than considering it an instrument for safeguarding a family’s future.

    One of the critical benefits of a term plan is that it offers high coverage, i.e., you can purchase a policy with a high sum assured at an affordable cost. But people tend to ignore this aspect of term insurance and hesitate to buy them.

  • Most agents lack training
  • The majority of the insurance companies in India provide little or no training to the insurance agents about their insurance products and services. Most agents have insufficient knowledge about insurance products, and although they have good marketing skills, they find it challenging to convince potential buyers to purchase the policy. The agents too hardly make any effort to learn about the different insurance products, and they focus on mainly selling a few products that fetch them a high commission.

As an insurance buyer, be more aware

Suppose you are looking to purchase a life insurance policy. In that case, you must take your time researching different types of policies available in the market before approaching an agent. When you talk to an agent, ask them for a term plan, and if they try to avoid talking about it or try to push you to purchase a specific plan, politely decline their offer and look for another agent.

Nowadays, most insurance companies offer a variety of term plans that you can either buy through the agents or purchase the same online directly from the insurance company’s website. It is better to purchase online, as you can compare the different plans and make a more informed purchase decision.

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

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