Often people refrain from buying a life insurance policy because of the premium they have to pay. The premium is the amount that a buyer will need to pay for availing coverage in case the individual passes away within the policy period. The cost of this is determined by the age of the potential policyholder, family health history, work habits, lifestyle, and place of residence, among others.
To make a smart purchase decision, you must know how to get the coverage you need at the premium price that fits your budget. Here are some tips on how to save money on life insurance premium without compromising on the extent of the coverage:
1. Buy life insurance when you are young
The probability of health risks is lesser among younger individuals. Insurance companies factor in the buyer’s age and the mortality risk before issuing a policy. The older the individual, the more the chances of raising a claim. Hence, delaying the purchase will be cost-heavy in the long run.
2. Lead a healthy lifestyle
The cost of your term insurance premium is majorly influenced by your health. When evaluating the risk levels, insurers carefully consider your overall health. You can maintain a healthy lifestyle by following a nutritious diet, staying physically active, and not having habits of smoking or drinking can help you maintain better health and lower your premium.
Higher premiums are charged from people who smoke or consume alcohol because of increased health risks. However, if you give up smoking and remain smoke-free for a few years, many insurance providers may review your status and offer a reduced premium on your term insurance plan.
3. Choose the right sum assured
Selecting the right sum assured is important if you are looking to keep your term insurance premium affordable. The goal is to secure enough coverage for your family without overpaying. Over-insuring can increase your premium unnecessarily, while under-insuring might leave your loved ones financially vulnerable. Use a term insurance calculator to estimate the ideal coverage amount by factoring in your financial responsibilities—like outstanding loans, education costs, and household expenses. The right balance ensures solid protection for your family without straining your budget.
4. Stay away from risky activities
Frequent participation in risky activities like skydiving, scuba diving, rock climbing, etc. affects the premium rate. Try to minimise lifestyle activities and hobbies that expose you to hazardous conditions and pose a risk to your life.
5. Get lesser premium term insurance plans
Opt for term insurance if you are sure about the total period for which you will have liabilities to fulfil. The longer the insurance term, the more is the rate of premium. The risk to your life increases towards the end of a long policy period. The years when you get older are more expensive to insure, and insurers average the costs in your total premium. Also, you have to bear the premium cost longer, increasing your total outgo.
However, term insurance typically offers more life cover at affordable premium rates. Even if you need coverage well into your old age, with whole life term plans, you can get the protection at lesser premiums.
6. Choose annual premium payment over monthly payments
You can pay your premium at monthly, quarterly, half-yearly and yearly frequencies. While paying in monthly instalments can be convenient and affordable, it costs more in the long run. Insurance companies charge an extra fee for choosing the monthly premium mode, as it involves more chances of non-payment of premium after a few months. To save money on life insurance, try and pay your premium annually. Some insurers also offer discounts on a lump sum payment of the full premium at one go.
7. Analyse life insurance policies before buying one
Nowadays, you get various insurance policies offering a range of benefits at attractive premium rates. However, it is wise to analyse the different policies online. It can help you locate the plan offering a wider scope of coverage at a lesser premium rate. You should also confirm the insurance company’s reliability before purchasing a policy by checking its claim settlement ratio2 (CSR). The CSR is the number of claims the company paid compared to those it received in a financial year.
8. Buy your policy online
It is better to buy your insurance policy online. Online policies often cost less because you do not pay the charges for middle agents. Also, since online purchases reduce operational and administrative costs, insurers offer online policies at lesser prices.
Moreover, you have access to a range of different policies at your fingertips to speed up your research on the benefits offered. You can also get premium quotes by entering your details, and find a policy providing the most competitive interest rates. Thus, you save both time and money by buying online.
Conclusion
You cannot change some of the factors on which life insurance premium rates depend. But you can always reduce the effect of these factors with informed choices. Besides the tips above, you can also take steps like paying your premium on time and not including unnecessary add-on covers. It is advisable to first determine how much life cover you exactly need. Assess your financial needs, life goals, and budget to find a policy that meets your requirements. This way, you can save on the premium and secure the coverage necessary to meet your loved ones’ expenses in your absence.
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