Purchasing a term insurance plan should be one of the most essential additions when it comes to building your financial portfolio. The policy offers financial security for a relatively low cost when compared to other forms of insurance. The policyholder has the option to select high coverage at a very low premium amount. This coverage would help cover any financial loss your family might incur in the event of your demise.
Even though the premiums are less when compared to other forms of insurance plans, they can add up to become quite substantial amounts if bought later in life or in the event of term renewal.
Here are eight tips on how to get the lowest premiums on your term insurance plan:
1 – Purchase a term plan when you are young
In term life insurance, the premium varies according to the age of the person purchasing the policy. As age increases so does mortality risk and the chances of developing health conditions. As a result, the higher the mortality risk, the higher the premiums. Therefore when you purchase a term insurance plan early on in life, you can expect the premiums to be significantly low.
2 – Maintain Good Health and Lifestyle
Term plan premiums also depend upon the health and lifestyle habits of the policyholder. If there are any pre-existing medical ailments or physical complications then the premiums will be high. Bad lifestyle habits like excessive consumption of alcohol, tobacco or smoking will also lead to an increase in premiums. This focus on lifestyle habits and medical conditions are because these habits increase the policyholder’s mortality risk. Therefore, to compensate for the higher inherent risk, the insurance agency charges a higher premium.
3 – Choose a Longer Tenure
Term insurance plans have the option to choose long coverage durations which can be up to 40-50 years. The death benefit of the plan is only activated if the policyholder dies within this term period. This is where choosing the highest possible duration becomes the most beneficial for the policyholder. One of the main and obvious benefits is that as you get covered for a longer duration, it increases the chances of claim payments for the beneficiaries even after the policyholder’s enter into retirement age. The other salient benefit is that if you chose a lower term and wanted to renew or extend the term, the resulting premiums will be significantly higher than what you were paying before. If the term period was the highest possible then the premium amount would be less throughout the duration the policy is active.
4 – Choose to pay premiums in regular and annual mode
The way in which you choose to pay premiums also affects the amount of premiums owed. Term insurance plans have the option to pay limited or regular premiums. Limited premiums as the name suggest are due for a limited duration meanwhile in regular premiums the payments are due throughout the policy term. In regular premium payments, the premium rates are lower than that of limited payments. Also, annual or half-yearly premiums are significantly less when compared to monthly or quarterly premium payments as the policyholder receives a premium discount.
5 – Choose the correct coverage
Choosing the correct sum assured or coverage as the death benefit can be a hassle as being underinsured or over-insured, both have their own set of problems. If the term plan has unnecessarily high coverage then the premium amount would be high as well. If the premiums are extremely low then the resulting coverage would be less too. Therefore it is important to choose the correct amount of coverage by taking into a wide variety of factors like inflation, debt, medical expenses etc. This should ideally be around 12-15 times the annual income of the policyholder.
6 – Refrain from going overboard on value-added features
Term insurance plans a few decades ago were quite simple and did not feature much if at all in terms of customization. Modern term insurance plans, however, come with the option of supplementing the plan with a lot of value-added features that enhance the scope of the plan. Insurance agencies might offer inbuilt riders, the return on payment on maturity, the option of monthly incomes etc. It is important to choose wisely in this case. Compare and justify the reasons before committing to one. Inbuilt riders for example are a good addition to the plan but other paid features will result in an increase in premium costs associated with the policy.
7 – Utilise any available discount
Some term plans offer some discounts on premiums as well. Always check and be on the lookout for any discounts that are available online, for example; on insurance comparison portals. When finalizing a plan, try to get the maximum possible discount as it will result in a reduction in the premium amount.
8 – Compare before buying
The final and probably the most important tip that is often overlooked is don’t be hasty when choosing a plan. There are, potentially, hundreds if not thousands of term plans available in the market. Go online and compare the plans and their features as well as benefits before committing to one. By comparing different plans you give yourself the chance to find and choose a plan that charges the lowest premiums without compromising on the coverage amount.
Even though the premiums are less when compared to other forms of insurance plans, they can add up to become quite substantial amounts if bought later in life or in the event of term renewal.
Here are eight tips on how to get the lowest premiums on your term insurance plan:
1 – Purchase a term plan when you are young
In term life insurance, the premium varies according to the age of the person purchasing the policy. As age increases so does mortality risk and the chances of developing health conditions. As a result, the higher the mortality risk, the higher the premiums. Therefore when you purchase a term insurance plan early on in life, you can expect the premiums to be significantly low.
2 – Maintain Good Health and Lifestyle
Term plan premiums also depend upon the health and lifestyle habits of the policyholder. If there are any pre-existing medical ailments or physical complications then the premiums will be high. Bad lifestyle habits like excessive consumption of alcohol, tobacco or smoking will also lead to an increase in premiums. This focus on lifestyle habits and medical conditions are because these habits increase the policyholder’s mortality risk. Therefore, to compensate for the higher inherent risk, the insurance agency charges a higher premium.
3 – Choose a Longer Tenure
Term insurance plans have the option to choose long coverage durations which can be up to 40-50 years. The death benefit of the plan is only activated if the policyholder dies within this term period. This is where choosing the highest possible duration becomes the most beneficial for the policyholder. One of the main and obvious benefits is that as you get covered for a longer duration, it increases the chances of claim payments for the beneficiaries even after the policyholder’s enter into retirement age. The other salient benefit is that if you chose a lower term and wanted to renew or extend the term, the resulting premiums will be significantly higher than what you were paying before. If the term period was the highest possible then the premium amount would be less throughout the duration the policy is active.
4 – Choose to pay premiums in regular and annual mode
The way in which you choose to pay premiums also affects the amount of premiums owed. Term insurance plans have the option to pay limited or regular premiums. Limited premiums as the name suggest are due for a limited duration meanwhile in regular premiums the payments are due throughout the policy term. In regular premium payments, the premium rates are lower than that of limited payments. Also, annual or half-yearly premiums are significantly less when compared to monthly or quarterly premium payments as the policyholder receives a premium discount.
5 – Choose the correct coverage
Choosing the correct sum assured or coverage as the death benefit can be a hassle as being underinsured or over-insured, both have their own set of problems. If the term plan has unnecessarily high coverage then the premium amount would be high as well. If the premiums are extremely low then the resulting coverage would be less too. Therefore it is important to choose the correct amount of coverage by taking into a wide variety of factors like inflation, debt, medical expenses etc. This should ideally be around 12-15 times the annual income of the policyholder.
6 – Refrain from going overboard on value-added features
Term insurance plans a few decades ago were quite simple and did not feature much if at all in terms of customization. Modern term insurance plans, however, come with the option of supplementing the plan with a lot of value-added features that enhance the scope of the plan. Insurance agencies might offer inbuilt riders, the return on payment on maturity, the option of monthly incomes etc. It is important to choose wisely in this case. Compare and justify the reasons before committing to one. Inbuilt riders for example are a good addition to the plan but other paid features will result in an increase in premium costs associated with the policy.
7 – Utilise any available discount
Some term plans offer some discounts on premiums as well. Always check and be on the lookout for any discounts that are available online, for example; on insurance comparison portals. When finalizing a plan, try to get the maximum possible discount as it will result in a reduction in the premium amount.
8 – Compare before buying
The final and probably the most important tip that is often overlooked is don’t be hasty when choosing a plan. There are, potentially, hundreds if not thousands of term plans available in the market. Go online and compare the plans and their features as well as benefits before committing to one. By comparing different plans you give yourself the chance to find and choose a plan that charges the lowest premiums without compromising on the coverage amount.
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