Term insurance is one such policy that is usually preferred over other forms of life insurance by most policyholders. This is mainly due to the affordable premium rates, fixed period of protection, flexibility in options and such other factors. Nevertheless, it is seen that people still opt out of term insurance midway due to multiple factors such as finding a better term policy from a different insurance company or even investing in a different form of life insurance coverage. In those cases, the opted-out individual does not get any benefit of the amount invested in premiums as there is no saving component to term insurance.

However, along with a loss to the policyholder, it is also a loss to the insurance company as a source of income has been reduced. This is why insurance companies provide incentives in the form of loyalty rewards programme so that insured is motivated to stay and complete the whole term of the insurance.

What are Loyalty Rewards?

A loyalty reward is a manner of offering customers of any product or service some additional benefits in the form of points or bonuses. It helps in making the product impressive enough for the consumer to persist with it and not shift to another product of a similar nature. The primary goal of a loyalty rewards programme is to provide a form of dividend for being loyal to the product.

These are awarded for credit cards, various forms of insurance and market investment products, etc. The nature of the rewards compels the individual to stay on with the product in order to avail similar benefits in future.

Loyalty addition for staying on with a term insurance plan
As already discussed, despite being popular among the earning individuals, term insurance has its share of lapses. In order to incentivise the term insurance, many companies have come with additional bonuses for completing a certain period of duration with the plan.

1. Private Insurance Companies
   In the case of private insurance providers, the term policy can range from 10 to 30 years. Even the 10-year period may seem to be quite long when you have investment instruments with 3-5 year maturity period. As a result, consumers tend to stray away from term plans. To avoid this and retain the customer base, private insurers have started offering loyalty benefits from sixth policy year onwards. In addition, most private insurers also provide for a wealth booster every five years, starting from the tenth policy year. This wealth booster increases your sum of money with the growth in your funds, thereby compounding it and ensuring a higher sum assured
2. Public Sector Insurance Companies
   In the case of many public sector companies, the loyalty additions commence from the tenth policy year. Here, the insurer determines the loyalty addition by measuring out the difference between the guaranteed additions and performance of the insurance company. This additional sum of money is accumulated year after year and are paid along with the proceeds upon maturity. So, unlike private firms, the public sector has a limit of ten years to avail of the loyalty programs.

The similarity to other investment plans
The loyalty rewards programme is usually standard across investment plans such as endowment policies and unit-linked insurance policies (ULIPs), where a large chunk of your premium is assigned towards an investment fund. Here, the reward is measured as per the percentage of the sum insured and is paid either upon maturity of the policy with other benefits or at regular intervals which can be 3 or 5 years. This evaluation can differ from company to company and policy to policy. However, this is quite distinct from the term insurance loyalty reward both in terms of calculating procedure as well as term periods.

Loyalty Rewards: An Added Advantage
It must be clearly understood that loyalty rewards make the term insurance lucrative enough for you to carry on with the same basic policy. The manner of choosing term insurance primarily is based on factors such as premium costs, term periods, and flexibility of term adjustments, rather than loyalty rewards. Therefore, there can be cases wherein the basic policy of life protection along with its inclusions and exclusion can be better while the loyalty rewards might not be as lucrative as its competitors. Browse the website to know more about Life Insurance and the various Term Plans offered by PNB MetLife.