How do You Reduce Your Life Insurance Costs?

Life is subject to risks that may occur due to natural and accidental causes. In the event of death of a breadwinner, there is loss of income to the family that leave them in both financial and emotional chaos. If you are the sole earning member of the family, you must be anxious about the financial security of the family. You always want to ensure financial independence for your family, in case you are not around.

Buying a Life Insurance helps your family in fulfilling their financial needs and lead them a comfortable life, even in your absence. A life insurance policy pays a sum assured amount as a lump sum to the nominee/beneficiary, in the event of your death. It provides your family a financial support, so they don’t have to face any financial adversity. It is thus an essential insurance Policy that you must include in your savings and investment portfolio.

When it comes to costing part, you always want to make your life insurance policy affordable. In this article, you will be able to look through ways to reduce the life insurance cost.

Factors to Reduce Cost for Life Insurance

1)      Start Early

Age when you have invested in a life insurance policy determines its premium. If you buy a policy at a younger age say at 25 years, you will be charged at a lesser premium than the one if buy the policy at 35+ years of age. The reason being is that at a younger age, there is a lesser chance of getting severely ill and thus the lesser risk on the insurance company.

If Mohit aged 25 years opts to buy Bharti AXA eProtect with Rs 50 Lacs life cover with policy tenure of up to age 60 years, he is charged with annual premium amount of Rs 3,650. His friend Chandresh at 35 years of age buys the plan with the same cover & same policy tenure, his annual premium amount is Rs 5,200. Mohit has to pay Rs 1,27,750 and Chandresh needs to pay Rs 1,30,000 through the entire policy term. Here, Chandresh has to pay an additional amount of Rs 2,250 to get the same life cover, as he started investing in the life plan after 10 years.

Thus, it would be a wise decision to buy life insurance at an early age, so you can ensure financial security of the family at a lower cost.

2)      Smoking & Drinking Habits

Bad lifestyle habits such as smoking or drinking alcohol impact your health negatively and thereby, increase your mortality risk. That’s the reason, why insurance companies provide you a life cover at a higher premium.

If Mohit (non-smoker) at 25 years of age buys Bharti AXA eProtect with Rs 50 Lacs life cover with policy tenure of up to age 60 years, he is charged with annual premium amount of Rs 3,650. His friend Chandresh (smoker) at the same age buys the plan with the same cover & same policy tenure, his annual premium amount is Rs 6,150.

Mohit has to pay Rs 1,27,750 and Chandresh needs to pay Rs 2,15,250 through the entire policy term. Chandresh has to pay an additional amount of Rs 87,500 to get the same life cover and that’s only due to his smoking habit.

Thus, it is advisable to quit smoking and other unhealthy habits, so you can get a life cover at a reasonable premium.

3)      Premium Payment Mode

On buying a life insurance policy, you have the flexibility to choose from monthly, quarterly, semi-annually and annually mode of premium payment. The chosen mode of premium payment also makes an impact on the premium amount that you will pay. Choosing the annual payment mode is a cost-effective option rather than opting for monthly, quarterly or half yearly mode. It is always better to opt for annual premium payment, so you can get the life insurance policy at a reduced premiums.

With LIC, you can avail discount of 2% on the premium amount, when paying through annual mode.

4)      Choice of Riders

Riders provide you the additional protection, but these are available at extra cost. All riders might not be helpful for you and it is recommended to first assess your protection needs and choose a rider(s) that help you attain enhanced protection for you or your family. You only need to go through the features and benefits that a rider offers and then choose wisely.

If Mohit at 25 years of age buys Bharti AXA protect with Rs 50 Lacs life cover and opts for Accidental Death Benefit Rider with Rs 5 lacs cover and policy tenure of up to age 60 years, he is charged with the annual premium amount of Rs 3,900. His friend Chandresh at the same age buys the plan with the same cover and policy tenure of up to age 65 years and opts for Daily Hospitalization Cash Benefit Rider, his annual premium amount is Rs 5,592.

Mohit on choosing Accidental Death Benefit Rider has to pay the total premium amount of Rs 136,500 and Chandresh on opting Daily Hospitalization Cash Benefit Rider has to pay the premium amount of Rs 1,95,720. So, Chandresh needs to pay an additional amount of Rs 59,220 due to his choice of rider.

So, it is wise to assess the rider benefits and then choose the one, as per your need.

5)      Sum Assured

The sum assured under the life insurance policy also makes an impact on the premium amount. When you opt for a higher sum assured, the insurance company provides you the cover at a discounted premium. Policies with the higher sum assured also keep you covered for a longer time, plus cover your family against ever rising inflation down the years. As getting a higher cover may cost you additional premiums, so you should go for a sum assured that fits to your protection needs.

You can enjoy premium rebates on high sum assured, when choosing plans from Aviva life, SBI Life, IDBI Federal Life, and many more.

6)      Mode of Policy Purchase

When buying life insurance via an agent, you need to pay premiums to the insurance company at a higher rate that includes agents’ commission. However, when you buy a plan online, as no agent is involved, you can get the life cover at a reduced premium amount. It is thus a prudent move to first Compare Life Insurance Policy and then purchase it through online mode. Comparing plans help you choose from one of the Best Life Insurance Plans.

There are various insurers that offer discount on buying policy online. Canara HSBC Oriental Life on buying Smart Suraksha Plan offers 5% discount on buying plan online. HDFC Life Click 2 Protect Plus offers a discount of 5.5% on premium amount, when buying online.

To summarize, buying a life insurance policy provides financial protection for your loved ones, when you are not around. Life insurance is an essential part of a prudent financial planning, as it pays the sum assured amount to your family, in the event of your untimely demise. Moreover, you can also reduce the cost of your life insurance by focusing on the tips as mentioned in this article.