As you grow up, you will be saddled with many important money decisions. One of them is getting a term insurance policy. This protects your family in case something happens to you. But did you know you could reduce the cost of this insurance without losing benefits? Let’s explore how!
What is a Term Insurance Policy?
The term insurance policy will pay your nominee the amount if anything goes wrong with you. This type of policy allows your family to pay all the expenses they have, pay back loans, and manage all other daily needs. The money that you pay every month or annually for this kind of insurance is termed a premium. The lower your premium is, the more you save!
What is a Term Insurance Premium Calculator?
A term insurance premium calculator is a method through which one can check out how much premium he needs to pay for his policy. So, one enters his age, income, and amount of coverage in the calculator and it will indicate his premium to him. So, you compare different policies to find the best one.
Here are some tips on how you can reduce the term insurance premium without losing its essential benefits
1. Invest in Insurance as Early as Possible
The term insurance policy you are going to receive would be much costlier if purchased at a younger age. This is just because the risk of healthiness and relative lack of any particular disease of any person usually occurs when the individual is relatively younger. And then, in the event of investment at a relatively early stage, the low premium becomes a sure shot for all years.
Illustration: Getting term insurance when one is 25 is way cheaper than purchasing one when 40.
2. Getting Right Coverage Amount
Do not take more coverage than needed. Use a term insurance premium calculator to check the right amount based on your income and expenses. A high coverage amount means a high premium, so choose wisely.
Tip: If your family requires ₹50 lakhs to sustain their livelihoods, you do not need ₹1 crore cover unless they require so.
3. Healthy Lifestyle
And it is your health that will determine the cost for your insurance premiums. So, if you have problems with diabetes or blood pressure, the premium will be on the higher side. Keep healthy by exercising, eating good food and avoiding junk food.
Tip: Always exercise regularly and eat in portions to keep your premium minimal.
4. Don’t Smoke and Drink Alcohol
They will have higher premiums if they are smokers and drinkers because they have more risks of getting health problems. If you do not smoke and drink, then you get the low premium.
Example: A smoker may pay double the amount compared to a non-smoker for the same coverage!
5. Choose a longer term policy
A long policy term means you pay a reduced premium per year. In case you opt for a short-term policy but renew it later, the premium will be higher. Therefore, opt for a policy that will keep you covered for a more extended period.
Illustration: A 30-year policy has a lower yearly premium than a 10-year policy renewed three times.
6. Compare Various Insurance Plans
Don’t go for the first policy that comes to you. Compare a lot of insurance companies with the help of term insurance premium calculator. There are a few insurance companies that will provide the same benefit at lower premiums.
Suggestion: At least compare 3-4 policies before choosing.
7. Pay Premiums Annually Instead of Monthly
Many insurance companies add an extra fee to pay your premium on a monthly basis. Paying yearly saves you some amount.
Illustration: Paying ₹1,000/month is equivalent to paying ₹12,000 for a year and making a yearly payment of ₹11,500 may save ₹500
8. Choose Simple Term Plans with no extra additions
Extra benefits include accident coverage and critical illness riders. Though these are useful, they inflate the premium. Choose only the add-ons you need.
Tip: If you are young and healthy, you may not need the critical illness riders yet.
9. Opt for a policy that has a high claim settlement ratio.
Claim settlement ratio is the number of claims an insurance company settles. The company with a high ratio is considered reliable. Hence, your family saves hassle and benefits free.
Tip: While buying any policy, check for the claim settlement ratio.
10. Buy Insurance Online
The cost of buying insurance via the internet is cheaper than when it is purchased from an agent. Insurance companies save on the commission of the agents and pass the savings on to the clients.
Example: A term insurance bought online is cheaper by 10-20% compared to one bought offline.
11. Stay Physically Fit
If you are fit and in the normal weight, then your premium will be lower. Many companies provide discount benefits to healthy BMI.
TIP: Regular walking, jogging, or exercises help you maintain a fit lifestyle.
12. Periodical Review of Your Policy
Your financial conditions keep on changing from time to time. Reevaluate your policy at periodic intervals; whether it requires any amendment or not. Maybe, you will get the best plan for which you may have to pay fewer premiums.
Tip: Run a term insurance premium calculator after every few years to search for some better deals.
13. Seek Family Discounts
Other insurance companies give discounts if more than one family member is under their coverage. Your parents or siblings may require insurance too, so be sure to ask for a family discount.
14. Avoid Unnecessary Medical Tests
Some medical covers demand that tests be performed before when insurance cover is effective. When results are found, the premium charged to the client is high. If you don’t have a health issue, seek those that do not require tests.
Tip: Eat healthy and get fit before going for that medical test.
15. Increase your coverage smartly
Instead of a very big policy, you may also start with some basic plan wherein the coverage level is increased over a period as the income boosts up. So, the premium during the initial phases of your purchase will be much lower.
Illustration: Start with ₹ 50 lakhs now and after gaining more responsibility increase it up to ₹1 crore.
It is a very prudent policy, and you are securing your family’s future. You don’t have to pay too much for the premium. By just simple choices, you can cut your premium, and you still get not even a single benefit removed.
Compare the plans with a term insurance premium calculator while making your choice to invest in the best plan. Healthy life and then buy the term insurance as early as possible; then, a lot of money would be saved. Buy just what you need: small steps today will make you save some amount of money, and make your future sure and secure.
Now, you learn about insurance, which will help you make smart financial decisions when growing up. Be smart, plan, and protect your future without spending too much!