How To Cut Life Insurance Costs

Premium affordability is often the reason people reconsider their Life Insurance needs. The benefits offered by a life cover end up being secondary to its costs when it comes to finalising the right insurance product.

Affordability of premium is not to be ignored. However, it is not advisable to save costs by picking a product that doesn’t meet your needs. That said, there are plenty of ways to reduce your premium costs without compromising on the quality of the insurance cover you want to buy.

To understand how to cut premium costs, we need to understand how the premium cost is determined by an insurance company. Insurers typically consider a policyholder’s age, geographic location, health, and lifestyle to look at the risks, charging higher premiums to individuals with higher risks. Let’s look at a few ways in which we can control these factors, thus cutting cost on premium.

Buy Young

Buying insurance early in life gives you the advantage of low premium costs. Your youth provides you with a low mortality risk and you can lock in a good coverage at low costs when you’re at your healthiest. Premium costs typically increase in tandem with age and pre-existence of ailments. So, do not procrastinate when it comes to buying your Life Insurance policy because delaying will only increase your expense.

Buy A Term Plan

Term Insurance Plans are very cheap as compared to those provided by typical ULIP or endowment plans. For example, a 30-year-old salaried individual can buy a life cover for Rs. 50 lakhs with annual premiums starting from around Rs. 3,500. This also frees up the rest of your savings for investment in more attractive avenues such as Mutual Funds.

Compare Before Buying

Do not buy a policy going by a TV advertisement or because your friend recommended it. Compare all the insurance products available in the market and pick one that fits your requirements and is priced competitively.

Although most insurance companies offer similar features, the claim experience varies, affecting the premium price. It is not surprising to find two similar term plans offered by two insurers at different prices. Comparing lets you buy the best plan at the best rate. Moreover, getting quotes have become much easier now with all products available online.

Maintain A Healthy Lifestyle

Life Insurance premium, as well as policy application acceptance, hinge on the applicant’s health. The insurer may ask applicants to undergo physical assessment. A smoking habit is likely to have an impact on your premium. The premiums of a Life Insurance policy is determined based on your mortality risk. And the mortality risk can be lowered by maintaining a healthy lifestyle, including abstaining from tobacco.

Buy It For An Optimum Tenure

The longer the tenure of your life policy, the more it’s going to cost you. The example of the 30-year-old, shared in the paragraph about term plans above, is for a 20-year tenure. The same coverage for a 10-year tenure would cost lower premiums starting from around Rs. 3,300. For 30 years, the same coverage would cost higher starting at around Rs. 4,110. Your optimum tenure should be up till the time you have financial dependents – for example, your three-year-old child may need another 25 years to become financially independent.

Buy Online

Last, but not the least, try and buy the policy online. Life Insurance policies are often sold by middlemen (agents, brokers, etc.) who get a commission on every purchase. This commission is included in the premium charged to the customers. To avoid such additional costs, eliminate middlemen by purchasing insurance online, either directly from the insurer or through online aggregators.

By keeping these tips in mind, you can save yourself from burning a hole in your pocket without cutting short on the coverage. Compromising on benefits would defeat the purpose of buying Life Insurance.

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