Looking for the right price in term insurance? Here’s how to score the right deal
Term insurance is invaluable if you have financial dependents. This insurance solution allows you to get high coverage at extremely affordable premiums that suit your budget. However, there are several term plans available in the market, offering different features and prices. So, how do you select the right deal? Here is a guideline that can help you customise a plan and get the right price on your term insurance.
1. Buy early
Age is a crucial factor that determines your term insurance premiums. The risk of mortality and lifestyle diseases are lower when you are young. Thus, insurers ask for lower premiums from young applicants. Chances of rejection are low as well, due to the same reasons. In addition to this, the premiums remain fixed throughout the policy tenure. So, if you want to save on term insurance premiums, buy a plan as early in life as you can.
2. Optimum cover right from the start
The life cover1 that you select also decides the cost of your policy. Therefore, determine the sum assured after careful calculations. For this, you need to consider factors like:
- Your family's present living costs
- The necessary span of monetary support for your family
- Your current financial liabilities (loans, mortgages, etc.)
- Future responsibilities (children's education, children’s marriage, etc.)
- Inflation rate
- Old age funds for your spouse
- Your existing assets (fixed deposits, mutual funds, etc.)
You can use an online human life value calculator for precise estimates. Based on your current income and potential needs, you can arrive at an approximation of your ideal life coverage. This will allow you to buy the correct coverage and avoid excess premiums.
3. Select your policy term
Longer tenures spell higher premiums. Thus, it is advisable to buy term insurance only for the duration through which your nominees will need financial assistance. However, do keep in mind that your policy should not end before you complete your monetary obligations. It is recommended to continue your policy until you acquire enough assets to secure your family's finances. The correct approach is to find out when your net economic worth will exceed the life cover1 that you need now. That age will be the exact time until which you require insurance. By choosing the accurate term, you can avoid unnecessary premium burdens.
Here is a simple way to deduce the right term:
Your ideal policy term = (The age when you expect to achieve zero liability or amass enough corpus to meet remaining responsibilities) – (Your present age)
4. Select the premium payment mode as per your resources
Search for policies that provide multiple premium payment options. If budget is a constraint, you can opt for monthly payment plans. That way, you have to bear only a small sum per month. However, you can get lesser premium quotes when you pick annual payment modes. Some plans can help you save up to 2.5% on your total premium with yearly payment plans.
5. Consider a limited-pay term plan
You can save a substantial sum on your total premium outgo with limited-pay options. Such strategies allow you to pay off your premiums early. Your life cover1 continues for the entire term of your policy. For example, if you are 35 years old and you buy a 25 years term plan, with a premium payment term of 10 years, you can finish paying all your instalments by the age of 45. Yet, your policy benefits will continue until you turn 60. This facility reduces your liabilities in your advanced age while ensuring sufficient protection for your family.
You can choose your premium payment term according to your finances. Reliable insurance providers can provide options that help you save up to 65% on your premium cost. This option is also apt if you are unsure about your capacity to continue the payments to the full policy term.
6. Buy online
When you buy your term insurance online, no intermediaries are involved. Thus, insurers provide a premium advantage on online policies. You can score sizeable discounts on your premium if you buy your term plan online.
7. Make use of riders wisely
Riders are useful in increasing your coverage at a nominal price. However, you need to assess your needs well before investing in additional covers. You can look for insurance providers who let you add benefits later. For instance, let’s assume that you enjoy adventure sports. Insurers often refuse payouts for unfortunate events arising out of such hazardous hobbies. So, you can choose to add accidental death benefits later when you give up indulging in such pastimes.
Another option is to invest with insurers who offer in-built benefits at no extra cost. Some insurers provide accidental disability, and terminal illness covers free of charge. The former waives off premiums in case of permanent disabilities due to accidents. The latter offers accelerated payouts on the detection of terminal conditions.
8. Maintain a healthy lifestyle
Term insurance costs more for smokers, individuals who consume drugs and alcohol, or have a high body-mass index (BMI). Eliminating unhealthy lifestyle choices can help you secure low-term insurance premiums. Eating well and regularly exercising also reduce the probability of lifestyle diseases.
9. Choose the economical payout option
In most cases, if you opt for a monthly income payout option for your nominee, you need to pay the least premium. You can search for an insurer that allows your beneficiary to convert the monthly income into a lump sum if they need it.
10. Increase life coverage with increased income
Many insurance companies provide the option to increase the sum assured with changing financial needs. If you do not need extensive coverage right now, you can select a lower benefit at premiums that fit your pocket. With age, as your income increases along with your financial dependents, you can raise your life coverage as well.
Term insurance is a long-term financial contract. Thus, choosing the right plan is essential to prevent policy lapses. Consider ways to optimise premiums and safeguard your family's financial future without straining your resources.