Term Insurance Premiums Explained
Term insurance is the simplest and most cost-effective form of life insurance available to us. Term life insurance protection ensures that your family’s life goals such as children's education or marriage don’t get disrupted even in adversity. Therefore, term insurance should be an important part of your long-term financial goal-setting plan.
To get continued life insurance cover, one has to pay term insurance premium, and the size of the premium varies according to various factors.
But before that, what is a term insurance premium?
Term Insurance premium is nothing but the cost of providing insurance cover.
Importance of term insurance premium payment frequency
Your insurance company allows you to pay the term insurance premium in various frequencies depending on the product terms and conditions. Whether you buy term insurance online or offline, you can opt to pay on annual, half-yearly, quarterly or monthly basis as per the terms and conditions mentioned under the policy. However, the cost of the premium is directly proportional to the number of times you pay in a year.
In that case, paying monthly premium will cost you more than quarterly payments. Subsequently, quarterly payments are costlier than half-yearly payments while annual premium payments are the most cost-effective. With annual premium payments, you get the maximum value for your money.
How to reduce your term insurance premium?
As discussed above, there are several factors that impact the term insurance premium rate for a policyholder. Though there are some factors that are not under your control, there are a few simple steps you can take.
Buy early to get lower premiums
One of the important factors that determine the premiums in a Term Insurance Plan is age. Typically,. the younger you are, the lower the premium . As such, it is recommended to buy the plan at a young age so that you can lock in lower premiums. Since the premiums do not change over the policy tenure due to age, you can continue paying lower premiums even as you grow older.
Stay fit and healthy
Your health condition has a direct bearing on the premium charged by any insurance company to provide you with life cover. For instance, a person with a long history of illness and suffering from diseases such as diabetes and heart disorders carries a bigger risk for the insurer. Hence, the rate of premium for such policyholders may be higher than that for an individual with normal health. In such cases, the policy may also be rejected on medical grounds. Therefore, staying fit has many perks, and one of them is not paying any extra premium for covering oneself.
Keeping these factors in mind, you should buy term insurance online while you are still young and healthy. Since both your health and age is generally in your favour when you are just starting your job, it’s the right time to get term life insurance.
Quit smoking
Insuring a heavy smoker is risky business for the life insurance company because the likelihood of a claim is higher. This is the reason why there is a significant variation in term life insurance premium between a non-smoker and one who smokes. The classification is done basis the disclosure by the policy holder or a urine cotinine test.
Key Takeaways
Term insurance plans are a type of life insurance plan that come at affordable premiums, allowing you to choose a comprehensive coverage.
- While term insurance premiums are low, you can further reduce the premiums using some simple yet effective tips.
- Some of the most common tips to reduce term insurance premiums include buying young, maintaining good health, avoiding smoking, comparing plans etc.
- Choosing an adequate sum assured and the right policy tenure are also important to buy the right term plan.
- Declare your medical information correctly when buying the term insurance policy to avoid the possibility of claim rejections.
Conclusion
Term insurance plans can provide financial security to you and your family at very affordable premiums. So, choose a suitable policy with adequate sum assured and give peace of mind to your loved ones. You can use the aforementioned tips to manage your term insurance premium payments and enjoy pocket-friendly coverage. So, pick the suitable ways of reducing term insurance premiums and buy the right plan for your coverage.
FAQs
How does my age affect my term insurance premium?
Your age is typically directly proportional to your term insurance premium. The older you are, the higher the term insurance premiums will be .
Can quitting smoking reduce my premium? How soon?
Yes, quitting smoking can help in reducing your term insurance premiums since insurers charge different premiums for smokers and non-smokers. However, if you have already purchased the policy, quitting smoking would not reduce the premiums during the policy term.
How can I reduce my premium without compromising coverage?
To reduce your premium without compromising your coverage, you can -
- Buy young
- Maintain a healthy lifestyle
- Quit smoking and drinking
- Skip unnecessary riders
- Compare and buy the most competitive term plan
Are online term insurance policies cheaper?
Usually, you can find lower premium rates for online term plans since such plans do not involve intermediaries, which brings down the administrative costs of the insurer.
What happens if I miss a term insurance premium payment?
If you miss a term insurance premium payment within the due date, you get a grace period to pay the outstanding premium. Missing the premium even during the grace period would result in a lapse of the policy, wherein the coverage would stop.
Can I change my sum assured or premium payment mode after buying the policy?
Changing the sum assured is usually not allowed after buying the policy. However, some term plans might give you the life stage benefit, wherein you can increase the sum assured at important life stages like marriage or childbirth. However, this benefit should be selected when buying the plan.
The premium payment mode can be changed after buying the policy. However, such a change depends on the type of plan selected and the insurer’s terms and conditions about altering the premium payment mode.
Does maintaining a healthy lifestyle impact premium renewal rates?
When renewing the plan, you might have to undergo medical check-ups or submit a declaration of good health. If you maintain a healthy lifestyle, your medical reports would be favourable and the premium might remain the same. But if there are increased health risks, the renewal premium might be increased.
Are riders necessary, or can avoiding them lower the premium significantly?
Riders are optional add ons available at additional nominal premiums, which help enhance the scope of coverage of your term insurance plan. They are not necessary, but can be a good addition to the policy for extending the coverage.
How important is comparing term insurance plans before buying?
Comparing term plans is important as it can help you find the most comprehensive plan which also charges the most competitive premium rates.
