Selling Term Life as a POSP: Product Limits, Underwriting and Declines

Pure term insurance, with or without return of premium, is the first item on the POS-Life list. An advisor reads that and concludes, reasonably, that they can sell term life. They can. What the sentence does not say is that the term policy they can sell is not the one the client will find quoted on an aggregator, discussed by a colleague at a bank, or recommended by a fully licensed agent.

POS-Life products are a distinct filing. The Master Circular on Point of Sales Products and Persons, Life Insurance (Circular No. IRDAI/LIFE/CIR/MISC/215/12/2019), which consolidated the two guidelines of 7 November 2016 (IRDA/LIFE/GDL/GLD/222/11/2016 on POS products and IRDA/LIFE/ORD/GLD/223/11/2016 on POS persons), does not simply name term insurance as permitted. It defines the envelope that a POS-Life product must be built inside: simple, standardised, pre-underwritten, requiring minimal underwriting intervention at the point of sale. An insurer files a specific POS-Life term product against that envelope. It is a different contract from the same insurer's flagship term plan, sold through a different channel, under different constraints.

Almost every problem an advisor hits selling term as a POSP traces back to the same misunderstanding: treating the POS product as the ordinary product with a shorter form. It is a narrower instrument, and the narrowness is the design, not an oversight someone will waive for a good case.

In a fully underwritten term policy, the insurer prices the individual. It asks a long medical and lifestyle questionnaire, orders tests, pulls records, and sets a rate for that specific life, which can be standard, loaded for a condition or habit, postponed, or declined. That process is slow and intrusive, and it is also what lets the insurer offer a very large sum assured at a fine rate to a healthy applicant, because it has satisfied itself who that applicant is.

A POS-Life term product cannot do that. Rather than investigate the life and then price it, the insurer defines a box narrow enough that it can price everyone in it in advance, and accepts only lives that fit on the strength of a short declaration.

Everything the POS design gives, it gives by taking something away first. The practical consequences run in one direction:

• No medicals, so the box must be small. An insurer accepting lives without examining them controls its exposure by limiting how much it accepts and from whom. A pre-underwritten product carries a sum assured ceiling and eligibility bounds, and they are tighter than the fully underwritten equivalent from the same insurer.
• A short declaration, so the declaration carries more weight. Fewer questions asked does not mean fewer facts material. It means the small number of questions asked are load-bearing at claim stage, because they are all the insurer has.
• Standardised terms, so there is nothing to negotiate. There is no rate to argue and no loading to discuss, because there is no individual assessment producing one.
• One rate for the box, so a healthy life may pay for the box. Pricing a group in advance means the fittest applicants subsidise the rest. A very healthy young applicant seeking a large cover will often do better on a fully underwritten product, and telling them so is part of the job.

The exact ceilings and eligibility bounds sit in each insurer's filed POS-Life product, and they are not uniform across the market. Read the one you are appointed to place. Do not quote a limit you heard on a training call.

One constraint in the master circular is worth quoting because it silently removes an entire structure advisors assume is available:

The premium paying term under a POS-Life Product shall always be equal to the policy term.

On a fully underwritten term plan, premium paying term and policy term are separable. A client can take cover to age 60 and pay for it over ten years, or pay a single premium at inception. Limited-pay structures exist because they suit real situations: a client with lumpy income, a professional with a high-earning window and a long tail after it, a business owner clearing an obligation before a known event.

Under a POS-Life product, none of those are on your shelf. If the cover runs thirty years, the client pays for thirty years. There is no ten-pay version, no single-premium version, and no way to compress the payments into the years the client actually earns.

Every POS-Life term policy you place is therefore a thirty-year collection problem, not a one-time sale. The client must still be paying in year fourteen for the cover to be there in year fifteen, and no structure available to you removes that dependency. The advisor who sells a long-dated policy to a household with volatile income, without saying plainly that the premium is due every year for the full term, has set up the lapse themselves.

It also reframes what a client chooses when they pick the term. On a limited-pay product, a longer term costs more total premium but the payment burden is bounded. Here, term length and payment burden are the same decision. That is a conversation worth having at the proposal rather than at the third renewal.

The master circular requires that policy issuance turnaround on a POS-Life product not exceed four working days. It reads like a service standard, and advisors quote it to clients as one. It is more useful understood as evidence of what the product can contain.

Nothing that takes longer than four working days can be inside the process. Not a medical examination and its report. Not a request for financial documents the client has to find. Not a referral to an underwriter with a query, a reply and a decision. The turnaround is not fast because the operations are good. It is fast because everything slow has been designed out, and it is designed out because the channel does not carry it.

So the four-day number is a boundary marker. If a case cannot clear in four working days, the honest reading is not that the insurer is being slow. It is that the case has stopped being a POS case.

It is also the answer to the client who asks whether so short a process means the cover is somehow provisional. It is not. It is a fully binding contract on standardised terms, short because the terms were fixed before the client arrived, and because the insurer's protection against the lives it did not examine is the narrowness of what it agreed to cover, not a right to reconsider later.

This is the part of the job nobody trains for, and it is the part that separates an advisor from a form-filler.

Sooner or later you will sit with a client who genuinely needs term cover and who does not fit. The cases are predictable:

• The sum assured they need is above what the POS-Life product will issue.
• They have a disclosed condition, a treatment history, or a habit the pre-underwritten box does not accept.
• Their occupation is outside the eligible set.
• They need a limited-pay structure the premium-paying-term rule forbids.
• They need riders, or a structure, or a term the filed POS product does not offer.

There is no version of the POS product that stretches, and no appeal, because there is no individual assessment to appeal to. The box either contains the client or it does not. If it does not, the client needs a fully underwritten term policy, a route you cannot personally serve as a POSP.

There are three wrong ways out, and all three are the same wrong way. The first is to shape the disclosure until the client fits, a misrepresentation that surfaces at the claim, when the household is most exposed and the advisor is the person they trusted. The second is to sell them the POS product anyway at whatever cover it will issue, and let them believe they are protected, which converts a coverage gap into a false sense of one. The third is to say nothing and let the conversation die, which leaves an uninsured household and calls it caution.

The right answer is to tell the client, in terms they understand, that the product you are able to offer is not the right product for their situation, and why. That is a genuinely uncomfortable sentence to say and it is the correct one.

Having told the client they need a route you cannot serve, the obvious next thought is to pass them to someone who can and be looked after for it. That instinct is where advisors walk into a rule.

A POSP is prohibited from paying any fee, commission or incentive, by whatever name, to any person or entity for the sale, introduction, lead generation, referral or finding of business. The prohibition is on paying. But the surrounding structure constrains the receiving side too, because a POSP is remunerated by the entity that engages them, under the contract of engagement, and is tied to that one principal at a time. You are not a free-floating commission earner who can be paid by whoever happens to write the case. A private fee-sharing arrangement for passing a client sideways sits outside the contract you signed and outside the structure the channel is built on.

What is available to you runs through your principal. If you are tied to an intermediary, the client who needs a fully underwritten policy is one that intermediary may well be able to serve through its own licence. If you are tied to an insurer, the same insurer very likely writes a fully underwritten term plan through another channel. In both cases the correct move is to raise it through the principal, not to arrange something privately on the side.

And if there is no route at all, tell the client that too, plainly, so they can go and find one. An advisor who says "this is not something I can do for you, and here is what you should go and look for" has done more for that household than one who sold them something that fits.

Log the out-of-envelope cases rather than forgetting them. A client who did not fit the POS box this year is still a client with a real need, a household you know, and a candidate for every product that is on your list. The decline is the start of the relationship, not the end of it.

None of this is an argument against the POS-Life term product. It is a good instrument for the case it was built for: a straightforward life, a moderate sum assured, no complications, a client who would otherwise have bought nothing because the fully underwritten process was too much friction to start. That client is a very large share of the country, and reaching them is the reason the channel exists.

What the product does not tolerate is being described as something it is not. Three habits carry the weight.

Lead with the boundary. Tell the client early that this is a standardised product with a fixed box, that the premium runs for the whole term because the rules require it, and that if their situation is outside the box you will say so. A client told the boundary at the start trusts what you claim inside it. A client told at the claim does not.

Treat the declaration as the file. With no medical and no investigation, the client's answers are what the contract rests on. Ask the questions as written, record the answers as given, and never coach. The advisor's protection here is identical to the client's, which is that the disclosure was true.

Sell the term you can service. A thirty-year policy with thirty years of premium is a commitment attached to a household's cash flow. The sale is not finished when the policy issues in four working days. It is finished, or it is not, around year fifteen.

One last piece of context. IRDAI has signalled an overhaul of commission rules aimed at curbing mis-selling, with a consultation paper expected by end-July 2026 per Chairperson Ajay Seth. As of the date of this post that paper had not been published, and the reported ideas, staggered or trail commissions, remuneration weighted toward advisors who service the client, product-wise caps varying by complexity and tenure, and tighter disclosure, are proposals rather than rules. The direction of the concern is still worth reading. The behaviour the regulator describes as the problem is the sale that suits the seller and not the household, and on a POS-Life term product that is exactly the sale where the client did not fit the box and was written anyway.