How To Reduce Term Insurance Premium

Term insurance is the most cost-efficient way to get smart life cover. While term insurance premiums are reasonably low, as they provide pure life cover, there are ways to reduce the premiums with some smart moves.

Truthful Disclosures Keep Premiums Intact 

Reducing the premium in a life insurance policy at times can be an expensive affair if not done prudently. A classic example can be a non-declaration of any pre-existing health condition (heart ailment, diabetes, etc.) or habit (say smoking, alcohol consumption, etc.), wherein, though prima facie it can reduce the premium drastically, it may result in the policy being void at the time of claim.

“Complete and truthful health and lifestyle details disclosure at the proposal stage leads to no future premium loading or claim disputes, and also keeps the quoted premium intact,” says Narendra Bharindwal, president, Insurance Brokers Association of India (IBAI).

Buying At An Early Age Locks In Premiums 

“⁠Buying the life insurance policy at an early age is the best way to reduce the premium since a consistently lower premium will be charged throughout the policy tenure. This happens because age is an important risk factor for the insurer, and the chances of an insured suffering from any pre-existing health condition at an early age drastically reduce,” says Milind Tayde, head- employee benefits, Anand Rathi Insurance Brokers.

“The entire policy term will have the premiums frozen; the early buying leads to the saving of the whole insurance period,” says Bharindwal.

Select The Right Coverage Period 

The selection of the right coverage period decision is another factor. “The coverage should best survive until the major financial commitments, the likes of housing loans or educating children, are gone. It is advisable to let the insurance run no longer than this period, since they cost much more due to longer tenures,” says Bharindwal.

Avoid Fancy Writers 

Opting for a pure term plan (without any fancy, expensive, and unnecessary riders or enticement of a money-back plan) is the safest way to reduce your premium outgo. Opting for a single annual premium payment method rather than a monthly or quarterly payment term will also aid in this endeavor.

Buy Policy Online 

At times, buying a policy online can lead to a premium saving since it cuts the distribution cost (intermediary margin) to a large extent. Comparing plans from different insurers (with good claim settlement ratios and solvency margins) can help in arriving at the best-suited option.

Opt For A Policy With Medicals 

“⁠⁠Last but not least, one should go for a fully underwritten plan (with medicals) if they believe they are fairly healthy, as this will reduce the premium considerably compared to a plan involving no medicals, albeit most of the policies (especially for the aged proposers or proposers opting for a higher sum assured) do predominantly involve a medical test,” says Tayade.