Why are Premiums for the Term Plans Low?
Life insurance plans essentially focus on providing protection to your family. Term plan is also a type of life Insurance plan. However, there are certain conditions that make the term plan different from the other life insurance plans. The difference between them is directly responsible for lower premium rates for a term plan.
Before jumping into the reasons why the premiums are lower for the term plan, we must first understand the meaning of a term plan.
What is a term plan?
A term insurance is a type of life insurance plan which has the goal to protect your family from the unpredictability of the future in case of the policyholder’s untimely demise.
Why are term insurance premiums affordable?
Depending on the service provider, there can be many different reasons for lower term insurance premium rates. Here are some of the reasons -
Pure insurance coverage with no frills attached
Term insurance, also known as pure protection plans, offer only life cover. There are no maturity benefits, survival benefits, money-back features, saving or investment components attached to a term insurance plan. Therefore, they do not have to assure guaranteed returns. Due to the simple nature of a term plan, it reduces the burden on the company, and the individual also gets better rates. Also, term insurance only covers a very specific period of your life. If any mishaps happen to the policyholder in that term, the amount is promptly handed over to their nominee.
Even in the case of term plans with a return of premium, only the sum of the premiums paid is returned upon policy maturity. There are no complicated investments attached to these plans.
As a result, pure term plans are the most affordable life insurance plans available.
Life insurance policies that guarantee assured returns usually get those returns by investing your money in the market. Therefore, whenever you pay your premium towards these policies, they are then funnelled into different channels. Administrative charges, Investment and the cost of insurance are the three channels where the money is spent.
Term insurance, on the other hand, has no guarantees about return on investment. The low premium that you pay towards the term plan is bifurcated as the cost of the policy and other administrative costs.
How can you lower your term plan premium further?
Term of the policy
The premium for the low premium term insurance plans also varies with the duration of the policy. If the term plans cover a longer period, then the premium will also be comparatively higher. Similarly, for a shorter time period, the premium will be lower.
But you might have to pay extra to renew the shorter low premium term insurance plans. You can say that the rate of premium is directly proportional to the time period of the term insurance.
The lifestyle of the individual
Just like a life insurance policy, the insurer might ask you to provide a medical or fitness certificate. The term insurance premium rate can vary depending on the health of the individual. Many health factors are considered before the premium is decided. The person might be asked to furnish Various medical tests reports pressure and BMI reports as well.
The smoking and drinking habits of the individual will also influence the premium rate of the term plan. The general assumption is that a physically fit person is unlikely to contract any life-threatening diseases. The premium will also be considerably lower if you have no prior disability or illness.
This might come as a surprise to most people, but the profession of the person also plays a vital role. If the person works in an environment with significant health hazards, the premium will naturally be higher. Similarly, if the person is working a cushy office job, the term insurance premium will be lower. Jobs in mining, transport, oil industry, etc., are considered to be an accident-prone profession. The insurance companies will like you to lead a healthy accident-free life for a longer time. Depending on the policy, the premiums might remain unchanged if you change your job.
The payment structure for term plans
In a term insurance plan, you get the choice of premium payment mode and frequency. You can opt for single, limited or regular premium payment modes. Additionally, you can choose from annual, half-yearly, quarterly and monthly premium payment frequencies
Once you pay the applicable premium, the policy becomes active, and the coverage begins. In case of any unfortunate eventuality during the policy tenure, the nominee is paid the life cover sum insured. However, if the premium payment is missed, the policy lapses, and the coverage stops.
Term Insurance at Tata AIA
Tata AIA Life Insurance provides various low premium term insurance plans. The term plans can also be customised as per the needs of the individual. With our term insurance plans, you can avail of faster payouts in case of diagnosis of a terminal illness. You will also get discounted rates for a higher sum payout. The special feature of the insurance is that it can be taken up to the age of 100. The term plans by Tata AIA also provide flexible payout methods. The person can select either a lump sum amount or a monthly payout option.
Those who do not want to opt for comprehensive life insurance plans can instead for an affordable term insurance plan. However, it is essential to check out the features and benefits of a term plan before purchasing it.
Get in touch with our insurance advisors to know more about our term insurance plans.