Term insurance plans are known to be one of the most cost-effective life cover options in the market. Based on several different factors, you could get a high coverage for a relatively low premium cost when you choose the right term plan. Fortunately, your term insurance premium costs can be brought down further if you know what affects these costs.
If you are looking to reduce your term plan premium or get better premium rates, here are a few ways to get this done right.
Buy Early
One of the most straightforward ways to reduce your term plan premium is to buy your term insurance when you are young. The younger you are, the lower the risk of developing health issues, which translates into a lower term insurance premium. As you age, your risk of developing lifestyle-related diseases increases, and so does the cost of your premium. For example, a 25-year-old individual will pay significantly less in premiums than a 45-year-old for the same sum assured.
Opt for a Longer Tenure
When choosing your term insurance, selecting a longer tenure can help you lock in a lower premium. Since insurance companies calculate your premium based on the tenure and your age at the time of purchase, locking in a lower premium for a more extended period ensures you don't have to renegotiate or renew the policy at an older, more expensive age. You can enjoy a lower premium throughout your policy without worrying about the potential increase with age.
Maintain a Healthy Lifestyle
A healthy lifestyle can dramatically impact your term insurance premium. Insurance companies assess your health and lifestyle habits to determine the likelihood of claims. By maintaining a balanced diet, exercising regularly, and avoiding harmful habits such as smoking or excessive drinking, you reduce your risk profile.
Smokers and individuals with a history of alcohol abuse tend to pay higher premiums due to their elevated health risks. If you quit smoking, many insurers will reassess your premium after a few years of remaining smoke-free, potentially reducing your term plan premium.
Choose the Right Sum Assured
Opting for the right sum assured is critical in managing costs if you seek to get a lower premium for your term plan. While it's important to provide sufficient coverage for your family, over-insuring can lead to unnecessarily high premiums. Use a term insurance calculator to determine the appropriate sum assured based on your financial obligations, such as loans, children's education, and daily living expenses. Choosing the right sum assured can ensure your family is well-protected without paying more than necessary.
Compare Policies
Comparing various life insurance plans before settling on one is essential. Different insurers may offer different premiums for the same sum assured, depending on their underwriting policies and risk assessments. Use online comparison tools and term insurance calculators to assess various plans and premiums, ensuring you get the best deal.
Avoid Riders You Don’t Need
Riders, such as critical illness cover or accidental death cover, are additional benefits that can be added to your term insurance plan. While these can be beneficial, they come at an additional cost. If you are looking to reduce your term plan premium, evaluate whether you really need them. Opt only for the riders that are necessary for your financial situation. Avoiding non-essential add-ons can keep your premium values lower.
Pay Premiums Annually
Most insurers allow you to pay premiums monthly, quarterly, semi-annually, or annually. However, paying your term life insurance premium annually can result in savings when compared to frequent smaller payments. Insurance companies often charge more for monthly or quarterly payments due to administrative costs.
Review Your Policy Regularly
Regularly reviewing your term insurance policy ensures it remains relevant to your current financial situation. If your financial obligations have decreased over time, you may be able to lower your sum assured and reduce the term plan premium.
Reassess your coverage needs every few years or after significant life events such as paying off a loan or a child's education being completed.
Choose a Level Term Insurance Plan
A level term insurance plan provides only death benefits without investment components, making it a more affordable option. Many individuals opt for life insurance plans that have investment options, but these tend to have higher premiums. If your primary goal is protection, a level term insurance plan is an appropriate choice.
Reducing your term insurance premium is achievable with careful planning and a few strategic choices. Being more thoughtful about your term plan purchase can help you enjoy affordable life insurance coverage without sacrificing the protection your family needs. Moreover, regularly reviewing your policy and opting for the correct payment frequency and tenure will ensure your premium remains manageable throughout the policy's term.
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