A Term Insurance Plan should be a quintessential addition to your financial portfolio. The plan provides unmatched financial security which is not provided by any other financial tool. At very low premium costs you can select a high sum assured to cover the financial loss your family would suffer in case of your premature and untimely death. However, there are some handy 8 Tips which, when used, help in lowering the premium rate.
Tip 1 – Buy a plan when you are Young and Healthy
The premium of a term insurance plan depends on the Age at which you buy the plan. Age determines the Mortality Risk and as you grow older the mortality risk increases. So, when you delay buying a term insurance plan, the underlying premium rate increases. That is why it is recommended that you should buy a plan when you are young.
Tip 2 – Maintain Good Health and Lifestyle
Premiums of term plans depend on your Health and Lifestyle habits too. If you have any medical ailments or physical complications, the premium would be high. If you consume Tobacco the premium would be increased too. These increase in premium is with the underwriting assessment that medical ailments and lifestyle vices increase your mortality risk. As a result, the insurance company charges a higher premium to compensate for the higher inherent risk.
Tip 3 – Choose a Longer Tenure
Term insurance plans come with long coverage durations which go as high as 40-50 years. The plan pays the benefit only if death occurs during the coverage tenure. It is suggested that when buying a term plan, the highest possible coverage duration should be selected. This has two benefits. One, you get coverage for a longer period which increases the probability of claim payments for your nominees even after your retirement age. Two, your premium amount outflow is lower so that you don’t have to pay a higher premium afterwards for the same Sum Assure.
Tip 4 – Pay premiums Regularly and in Annual mode
Term insurance plans allow Limited as well as Regular premiums. Limited premiums are when you pay premiums for a limited duration while regular premiums mean paying premiums throughout the tenure of the plan. If you choose a regular premium payment option, your premium rates would be lower compared to limited payments. Annual or Half-yearly premiums are lower compared to Monthly or Quarterly mode as you get premium discounts.
Tip 5 – Choose the correct sum assured
While under Insurance is a Curse, over-insurance is No Boon either. Go for the ideal sum assured and this should be ideally 12-15 times of your Annual Income. If you buy a plan which has an unnecessarily high sum assured, your premium outgoes would be high too. So, be careful when selecting the sum assure and ensure that the chosen coverage amount is neither very high nor too low.
Tip 6 – Cut down on Frills and go for Basic Vanilla Cover
Modern term insurance plans come with a lot of value-added features which enhances the scope of the plan. There might be inbuilt riders, the option of monthly incomes, the return of premiums paid on maturity, etc. You should not go overboard in selecting these value-added benefits. Don’t choose a plan which has unnecessary frills. Inbuilt riders are good additions but other paid features to be weighed in terms of the additional premium costs associated with it.
Tip 7 – Utilise any available discount
Term plans might allow you some discounts on premiums. Be on the lookout for the available discounts like buying it online from the Insurance Comparison Portals. When choosing a plan, look out for the maximum possible discount which you can avail and reduce your premiums by using these benefits.
Tip 8 – Compare before buying
The last tip is also the most important one. There are hundreds of term plans available in the market. Don’t be hasty in choosing a plan. Go online and compare the available plans before you choose to buy one. Comparing lets you choose a plan which charges the lowest premium without compromising on the coverage benefits. There are Insurance Web Aggregator’s websites which can be chosen for buying the best term plan.