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Term Insurance Premiums Explained

 Term insurance premium reduction

Term Insurance Premiums Explained


May 07, 2020

By : Bajaj Allianz Life

Term insurance is the simplest and the most cost-effective form of life insurance available to us. Term life insurance protection ensures that your family’s life goals such as children 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 your premium varies according to various factors.

But before that, what is 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 a look at


• 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 carry 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.


• Buy term insurance online


You can save a significant amount of money by purchasing a term insurance online. As insurers don’t have to pay commissions to brokers and agents while selling online term insurance plans, they pass on the benefit to customers in the form of lower term insurance premium.

Relation between your age and term life insurance premium


We all age and grow old. It’s the law of nature and not under our control but it has a direct impact on your life insurance premium. Most financial advisors recommend buying term insurance early in your life since the premium increases rapidly with advancing age.

In fact, age is the primary factor that insurance companies take into account while calculating the term life insurance premium for the policyholder.

Let’s take an example. A 35-year old, non-smoking male has to pay Rs. 1,170 per month for a Rs. 1 crore term life insurance for a term of 20 years. But if he goes to purchase the same after two years, it will cost him Rs. 1,332 per month.

If you don’t want your term insurance premium to increase with advancing age, you can purchase a level term insurance policy. In a level term insurance policy, the premium rate remains the same throughout the policy term. Another solution is to buy a single premium policy where you pay a lump sum just once to get term life insurance coverage for your family.

Over the last few years, India has seen a reduction in term insurance rates due to intense competition in the insurance marketplace. In fact, costs of term insurance protection in our country are significantly lower (by almost 30%) to developed economies such as the United States and Singapore. However, that soon may change as prices rise to ensure sustainability.

Therefore, now is the best time to buy term insurance online and ensure that your family’s life goals do not get derailed in the future. As with most things in life, you should aim to buy term life insurance early in your life and reap the benefits of higher sum assured and lower term insurance premiums.

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