Often people refrain from buying a life insurance policy because of the premium they have to pay. The premium is the sum of money a buyer has to pay in exchange for financial coverage against an eventuality during the policy term. This amount depends on factors such as the prospective policyholder’s age, family medical history, occupation, lifestyle habits, and geographical location, 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:
- 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 are the chances of raising a claim. Hence, delaying the purchase will be cost-heavy in the long run.
- Lead a healthy lifestyle
Life insurance premium rates also depend on the prospective policyholder’s health status.
If you are fit, insurers will charge a lesser premium rate than a person having harmful lifestyle habits, such as smoking or drinking alcohol. Such habits, as well as obesity, increase health risks and chances of claims.
By changing your lifestyle and improving your health before buying life insurance, you can lesser the premium rate.
- Stay away from risky activities
Frequent participation in risky activities like skydiving, scuba diving, rock climbing, etc. affects the premium rate. Try to minimize lifestyle activities and hobbies that expose you to hazardous conditions and pose a risk to your life.
- 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 in 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.
- 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.
- Analyze 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 analyze 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 settling on a policy by checking its claim settlement ratio2 (CSR). The CSR is the number of claims the company paid opposed to those it received in a financial year.
- 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 offered benefits. 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.
To conclude
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 fits your requirements. This way, you can save on the premium and secure the coverage necessary to meet your loved ones’ expenses in your absence.
L&C/Advt/2023/Mar/0871