While you must try to save on the premium when looking for a life insurance cover, it is equally important not to compromise on the various benefits in order to get an adequate life cover.
Life insurance is undoubtedly one of the best possible ways to secure the future of your loved ones when you are no longer around. Your insurer makes sure to take care of your family in your absence and makes sure to provide them with the required financial support in days of need. As it involves your family, you must be smart enough to make this important investment of your life and also consider numerous factors to save on the premium costs. To help you better, here are some important tips to keep in mind when buying a life insurance cover. By following these tips, you can certainly make a correct decision and arrive at the right choice.
Get Life Insurance at an Early Age
One of the key benefits of purchasing life cover at an early age is that you get the desired policy at lower premium. It is advisable to buy life insurance coverage when you are young and relatively healthier compared to when you will be older and more prone to medical issues. For example, while the annual premium of a life insurance policy for a 30-year old male non-smoker residing in a metro city with total sum assured of Rs 1 crore (cover up to 70 years) will cost around Rs 8,500 to 12,000, the annual premium for the same policy for a 40-year male old will cost around Rs 14,500 to Rs 19,000.
As you grow older, the premium amount also starts increasing because the premium amount is entirely based on the probability of the policyholder making a claim in the near future. The younger you are, the lesser are the chances of you making a claim. While the premiums on life insurance are significantly lower for young individuals, the insurers adjust the premium amount as you grow old in order to cover the higher risk of the claim in case of death of the policyholder.
Pay Your Premium Annually
You insurer allows you to pay premium in a number of ways including monthly, quarterly, half-yearly and annually. Alternatively, the premium can also be paid as a lump sum (all the premiums in one shot before the tenure of the life insurance policy begins). However, some of the insurers charge an additional cost for choosing the monthly instalment method for payment of the premium. This is usually because the chances of policy lapsation are comparatively higher among people choosing to pay the premium monthly.
As mentioned above, some insurers even provide the option of making the premium payment as a lump sum (entire premium in one shot) wherein the policy holder gets a discount on the total premium. As a policy seeker, it is best to choose limited pay and save more on your premiums as you have the option of saving considerably on premiums over entire policy term. Also, when you pay in monthly instalments and cover yourself for a year (long-term) then the insurer has a risk factor here and hence the premium amount is a little higher.
Choose the Right Policy Term
While buying a life insurance policy, do make sure that the policy term of the life insurance policy is ideal. It is ideal to take coverage till the age you have liabilities. For example, if you are a salaried person and have an earning capacity till 60 years of age, it is advised to take a cover till the age of 60 so that you can meet all your liabilities easily.
Under a term policy, the optimum tenure can be the total period for which the insured feels that financial obligations must be filled. In case you wish to leave a legacy for your dependents, a whole life term policy must be purchased which will give you a guaranteed payout. There are numerous insurers available that offer term insurance for up to 99+ years.
Live a Healthy Lifestyle
In life insurance, the premium of your policy majorly depends on your health condition. Most insurers these days give utmost attention to the medical history of the policy seeker while finalising on a life insurance cover. For instance, the premium of a life insurance cover for a seasoned smoker can be 40 – 50% higher than that of a non-smoker. Thus, if planning to buy a life insurance policy, it is advised to make an effort to lower the mortality risk by following a healthy lifestyle to significantly reduce the premium amount.
Compare Plans before Buying a Life Insurance
Yet another important thing to keep in mind while planning to buy life insurance is that you must never decide to buy a cover only on the basis of an advertisement or on the recommendations of your closed ones. One size fits all theory does not apply on life insurance and there are quite some chances that the policy recommended to you won’t be sufficient to cover all your financial needs. In order to get the most out of your life insurance cover, it is advised to compare all the available options online on the basis of offered benefits, prices, tenure and claim settlement ratio. After proper comparison, choose the one which is available at affordable premium yet provides adequate coverage.
While you must consider all the above-mentioned tips to save on the premium when looking for a life insurance cover, it is equally important not to compromise on the various benefits and features in order to get an adequate life cover.
Below are price comparisons of a Term Insurance plan offered by 4 prominent insurers for a 30-year old male non-smoker residing in a metro city. The total sum assured is Rs 1 crore.
(By Santosh Agarwal, Associate Director and Cluster Head-Life Insurance, Policybazaar.com)