A Life Insurance plan helps you sail through the risks brought on by the uncertainties of life. Your family will be sufficiently protected financially in the event of your passing, thanks to life insurance policy. In the event of an unfortunate circumstance, your family will get the sum assured.
The cost of your life insurance premium should be viewed as an investment that ensures your and your family’s protection during trying times. Therefore, you need to be smart enough to pick the right policy, one that not only enables you to reduce the cost of your premiums but also offers sufficient coverage. You will be surprised to know that as per the latest Economic Survey released by the Ministry of Finance, only 3 people out of 100 have a life insurance policy in India. This figure stood at 2.82 in 2019.
What is a Life Insurance Policy?
A life insurance plan is a legal agreement between you and the insurance company that is represented by the policy. The premium is paid by you, and you receive a lump sum at maturity. In case of your untimely demise during the policy period, apolicy nominee receives the sum assured.
If the price of life insurance premiums has ever prevented you from buying a life insurance policy, there are several ways to lower your insurance premiums without breaking the bank. But before that let’s have a quick look at the factors that may affect the life insurance premium.
Factors that Affect Life Insurance Premium
- Age: With age, the chances of you falling ill or developing a serious medical condition go up. As a result, the risk of insuring you also goes up, thereby increasing the premium.
- Gender: According to a recent article, women have a longer life expectancy than men. So, women usually enjoy a lower premium rate than men. You can check your exact premium and the difference between the premium for both men and women by using our online insurance calculator.
- Lifestyle: There is an increased risk of developing serious illnesses for anyone who uses or smokes tobacco, thus increasing your life insurance premium. These behaviours have almost the same effect on both men and women.
- Medical History: The chances of contracting a condition or any pre-existing medical condition, pushes up the cost of insuring you, which, in turn, increases your life insurance premium.
- Sum Assured Selected: This one is logical; the higher the sum assured, higher the premium you pay for it.
- Tenure of the Policy: Again, the longer the policy period, the higher the total premium outflow will be. However, you get discounts on the yearly premiums if you buy a policy for a very long tenure.
- Mode of Premium Payment: The total premium paid for single pay and limited pay policies is lower than regular pay options.
- Premium Payment Frequency: If you choose annual payment options or even half-yearly options, you can save on the total premium paid for the life insurance policy of your choice.
- Choice of Riders: The Edelweiss Tokio Life Insurance Plans can be further enhanced with a range of riders9, such as Critical Illness Rider, Income Benefit Rider, Waiver of Premium Rider, Payor Waiver Benefit, Accidental Death Benefit and Accidental Disability Riders, at a minimal cost.
- Maintain a Healthy Weight: A greater mortality rate is associated with being overweight, which increases the likelihood of getting certain medical disorders. People who have heart disease or high blood pressure are more likely to pass away earlier than those who do not have these conditions. The cost of your premium may go up if you have certain lifestyle diseases like high blood pressure or hypertension. Consequently, it's beneficial to have a healthy lifestyle.
- Avoid Smoking, Drinking (or using any other Nicotine/Alcohol-Based Products): To state the obvious, smoking increases your risk for a wide range of health problems. Avoid developing the habit, and if you already smoke, stop as soon as you can. An insurance provider will view you as a smoker regardless of whether you "chain smoke" or "smoke only occasionally," making you a high-risk investment for them. For smokers, the term insurance premium will be expensive.
- Don’t Wait to Apply for a Policy: The older you are, the higher the risk of developing a medical condition and therefore, higher the premium you pay. As soon as you begin to earn money, it is advisable to start investing in a life insurance policy. In order to avoid paying a larger premium, it is therefore preferable to purchase insurance when you are young. For example, buying a policy at 25 years of age may cost you anywhere between ₹700-800 per month. Alternatively, if you buy the same policy at a later stage in life, say when you are 35 years old, it might cost you roughly ₹1300-1500 per month.
- Select the Premium Payment Mode Wisely: You have the choice of paying premiums in a number of ways when selecting a life insurance policy. This includes paying premium annually, bi-annually, quarterly or monthly. Certain insurance companies like Edelweiss Tokio Life Insurance allow their customers to pay the payment all at once, which is generally less costly than other modes of payment.
- Choose the Right Policy Term: If you go for a long coverage period, that will increase your premium charges. For example, a policy that lasts for up to 40 years means the insurance company is covering the risk of your death for a longer duration. Select your policy duration wisely considering all personal factors.
- Don’t Hide Your Medical Conditions: When buying a life insurance plan, you could be required to undergo a medical examination. You must be completely open and honest about your current state of health. You must specify and document any pre-existing medical conditions you may have. Because it raises the risk for the company, many insurance companies charge higher premiums for applicants who have pre-existing conditions.
When purchasing the coverage, you must communicate with the insurer in full transparency. At a later time, the insurance provider might reject your claim if they find out you lied about any medical information.
The selection of an online life insurance plan should be based on your understanding of the product. Hence, it is advisable that you dig a little deeper into the policy details before buying any life insurance plan. For more information on term insurance plans, Unit Linked Insurance Plans, or guaranteed income plans, click here.