Have you wondered – what is a term insurance plan? It is a pure protection plan that provides financial support to the beneficiary if an unfortunate incident happens to the insured person.
As the insured, you pay a premium to the insurer company for the tenure of the term plan. Since there is no maturity value if you survive the tenure, do not confuse other investment plans with what a term insurance plan is. A term plan serves to protect your family during unforeseen circumstances.
No one wants to spend money unnecessarily. A term insurance plan is a long-term plan. You may need to pay the premium for 30–50 years. So, if you save on this amount, the saved money will be compounded for years and become a huge corpus during your retirement.
Ways to Save Money on Your Term Insurance Plan
Term insurance is a cost-effective way to save your family from an unplanned crisis. If you are the sole earning member of the family, it becomes your responsibility to protect your family in case of an untimely event.
But, as an informed investor, you should know how you can reduce your term insurance premium. Some ways to do this are:
- Start Young
Before opting for a term plan, you can easily check your premium amount using a term insurance plan calculator. The premium depends on your age when you opt for the policy. When you are younger, you are healthier and have a lower risk of disease and insurance costs.
Therefore, if you take a term plan at a young age, the term insurance plan calculator will show a lower premium amount. This will remain fixed throughout the tenure of the plan – you will pay the same premium at 60, which you were paying at 25.
- Do Thorough Research
There are several term life insurance providers in India. Every company offers different kinds of products with different terms. So, research the different term insurance plans in the market. Once you start researching, you will find the correct policy that fits your financial needs, desired coverage, and budget for premium.
- Avoid Brokers
Brokers charge commissions from insurance companies for their services. A chunk of the premium you pay goes for paying their commissions.
However, all the information that you would need to buy a term plan is available on the insurance company’s website. So, instead of unnecessarily and indirectly paying the broker’s commission, do your research. Brokers may also push you to buy a product for which they get a higher commission, but might be irrelevant for you.
- Follow a Healthy Lifestyle
Most term insurance policies require a medical examination so they can evaluate potential insurance risks. If you are a smoker or have any disease, the insurance risks are higher. Thus, your premium amount will increase.
Therefore, make healthier choices financially and physically when choosing a term insurance plan.
- Opt for the Annual Payment Option
The insurance company gives you a discount or rebate when you pay the term insurance premium annually, instead of monthly or quarterly. The rebate may vary between 2–3%.
You do not need a term insurance plan calculator to understand the significant amount you will save with yearly, discounted premium payments. Take advantage of this option and pool money to pay your yearly premium.
- Check for a Better Policy during Renewal
Do not blindly renew the policy when the time comes. Instead, check for different plans in the market. Term insurance premium costs and terms are revised periodically. Look for the ideal term insurance plan that fits your priorities better.
- Try to Club All Policies Under One Insurance Provider
Most of us buy different insurance policies in our lifetime. If you buy them all from the same insurance provider, they may offer you a discount for your overall purchases. This will reduce your premium cost. Moreover, this will help your beneficiary save time during claim settlement.
Do not assume that a term plan only benefits your nominee. You can also enjoy its benefits. Your term insurance premium amounts are tax-deductible. This reduces your taxable income. Thus, you may end up paying less tax, according to your eligible income slab.
The key to saving on term insurance premiums is diligent research, good health, and avoiding shortcuts like brokers. Make wiser decisions, like paying yearly premiums and choosing a reliable insurance provider.
However, do not make it your sole objective to save money on premiums. The sum assured should be high enough to cover your family in case of an unfortunate incident. Do not compromise on your family’s future safety or your present health.