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How to Reduce Term Insurance Premium?

Updated on June 1, 2016

Reduce Premium by Using Tools Like a Term Insurance Calculator

Why Is Your Investment Portfolio Incomplete Without A Term Policy?

Did you know that the Indian life insurance sector is the biggest in the world, with 360 million policies? These figures were revealed in a report by The Indian Brand Equity Foundation published in April 2016, which also said that the industry is expected to grow at a CAGR of 12-15% from 2016 to 2021.

Life insurance is probably one of the most important investment products in your portfolio. There are five types of policies sold in India: term plan, whole-life, endowment, ULIPs and money-back. A term plan is the only pure product, while the remaining ones are part investment products. Being a pure vanilla product, a term plan offers comprehensive life cover at a low cost. This is a suitable scheme that can provide complete financial security to your family after your death. The sum assured, disbursed on claims settlement, can help your family take care of day-to-day expenses, pay for your child’s schooling and higher education, contribute to your child’s marriage expenses, pay off loans and credit card dues and help take care of other emergency financial needs.

The premium for the same cover amount tends to be much lower than other types of policies. This is because the entire premium amount goes towards funding the risk and also because there are no market-related risks.

How to Choose a Policy?

Before you zero-in on any particular policy, you must determine your insurance needs. You must choose your cover and tenure accordingly. This will, in turn, determine the premium that you would need to pay each month. The cover amount should be decided keeping in mind your family’s standard of living, financial needs that your family might encounter after your death and debts that you are paying off. You must also take the inflation rate into account in order to have an adequate cover, says an article published by Bharti AXA Life. You can choose the tenure until your retirement. Also, keep your loan repayment time window in mind.

Tips to Reduce the Term Insurance Premium Amount

Lower premiums can help you buy a higher cover and also considerably decrease your financial burden. Read on to know how you can get cheaper policies:

  • Buy a policy as early as possible. Premiums shoot up as you age because you are at a higher risk of contracting a disease.
  • Make the purchase online. Online policies are approximately 40% cheaper than their offline counterparts mainly due to the absence of any intermediary.
  • Insurers reward individuals who maintain a healthy lifestyle. You can go through a medical test to reap the benefits. Non-smokers usually have to pay lower premiums.
  • In case you plan to buy two policies to cover until retirement, do not wait for the first policy to expire to purchase the second one. Buying two policies just a few years apart can considerably reduce the premium for the clubbed cover amount, as illustrated by a blog post published in Smart Money Goal in August 2014.

Mistakes to Avoid

Close to 76% Indians do not understand key financial concepts, according to results from the S&P Global Financial Literacy Survey conducted in 2014. Make yourself aware of every aspect of your policy, whether it is the terms and conditions or method of claims settlement.

One of the most common mistakes that you might make is choosing the wrong tenure or cover amount. Follow a needs-based approach to avoid being over or underinsured. Avoid buying a life insurance policy with the sole intention of saving tax. You might save tax but the product can be inefficient to provide adequate life cover. It is best to keep your policy splits to a maximum of 2-3. Too many policies can increase your premium burden.

You can use the term insurance calculator to determine the amount of premium you would need to pay for a particular cover and tenure. Make sure to provide all correct information in order to avoid claims rejection.


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