Buying a term insurance plan is a smart strategy to give financial protection to those you care about. Nonetheless, the high premiums can sometimes seem overwhelming. Fortunately, you can apply several strategies to cut down your term insurance premium while maintaining the necessary insurance coverage.
Whether living a healthier life or selecting the right policy features, you can greatly reduce your premiums.
Read this guide for practical tips to help you lower your term insurance premium and make the most of your investment.
8 Ways to Reduce Term Insurance Premium
Here are eight different pro tips you can follow to reduce your term insurance premium:
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Invest Early
The earlier you invest in term insurance, the better the benefits. Age plays a critical role in determining premiums. A person in their 20s will pay lower premiums for the same plan compared to someone in their 30s. By investing earlier, the younger individual secures the same policy at a lower rate for a longer tenure than the older individual.
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Maintain Good Health
Your health directly influences the premium rates set by insurers. People with pre-existing conditions like diabetes or heart disease are seen as higher risk and are charged more. In some cases, insurance may even be denied. You avoid paying extra for your life cover by staying fit and healthy.
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Quit Smoking or Drinking
Both smoking and drinking negatively impact your health, which in turn, raises your life insurance premium. Smokers and heavy drinkers are seen as higher risk due to the likelihood of health issues like cancer or heart disease. Kicking these habits can help lower your premium, as healthier individuals pay less.
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Opt for Annual Payments
Paying your premium annually instead of monthly or semi-annually can help you save money. While smaller, more frequent payments may seem easier, they often add up to a larger total amount. Paying annually may involve a bigger sum upfront but can be more cost-effective in the long run.
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Compare Policies
One of the easiest but often overlooked ways to lower your premium is by comparing different term insurance plans. Instead of choosing based on ads or recommendations, compare policies to find the one that best suits your needs. This will help you evaluate the benefits relative to the cost, leading to a more informed decision.
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Select a Longer Tenure
Opting for a longer coverage period, like 40-50 years, can be beneficial. This ensures your nominees will receive the death benefit even after retirement age. Additionally, with a longer tenure, you lock in a lower premium and avoid paying more later for the same coverage amount.
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Be Smart with Rider Selection
Adding riders can boost your life insurance plan by offering extra protection in specific situations, such as permanent disability or serious health issues. However, every rider comes with an additional cost, so it is crucial to assess your needs carefully. Only include riders that provide value and fit your budget.
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Buy Online
Purchasing your term insurance online is often cheaper than going through offline channels. There are no intermediaries involved, making the process more direct and cost-effective. This can result in a lower premium than buying through an agent or broker.
What are the Different Factors that Affect the Term Insurance Premium?
The following are different key factors that affect the term insurance premiums:
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Age
The buyer's age is one of the biggest factors affecting life insurance premiums. Typically, younger individuals, particularly those in their 20s or 30s, pose a lower risk for insurers as they are less likely to suffer from serious health conditions and are expected to hold the policy longer. As a result, insurers face less liability and offer lower premiums to younger policyholders.
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Gender
Although not often discussed, gender does play a role in premium calculation. Statistics show that women generally have a longer life expectancy than men, making them eligible for lower premiums and longer policy terms. Many insurers use online calculators to help you compare premiums based on gender.
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Medical Records
Your health records are also crucial in deciding the premium for your policy. Most insurers require a medical examination as part of the underwriting process, which helps assess your health and identify any pre-existing conditions. Poor health or serious illnesses may lead to higher premiums.
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Family History
Certain health issues or hereditary diseases can be passed down within families. Additionally, family members often share lifestyle habits that make them susceptible to specific health conditions. Insurers consider this when determining the premium rates. A family history of critical illnesses could lead to higher premiums.
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Smoking Habits
If you smoke or use tobacco products, your risk of developing life-threatening conditions like lung cancer or heart disease increases. This risk applies equally to both men and women. Insurers view smokers as higher-risk clients and thus charge higher premiums.
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Premium Payment Tenure
The length of your policy’s payment period also influences your premium. Choosing a longer tenure spreads the risk over time, allowing insurers to offer a lower premium. This approach also helps you manage payments within your budget while securing long-term coverage.
By understanding the factors affecting your term insurance premium and making informed decisions, you can effectively lower your costs without compromising coverage. All small adjustments can lead to major results, whether investing early or stopping smoking. Using these 8 important tips guarantees you maximise the benefits of your term insurance plan, helping you obtain financial protection for yourself and your loved ones at an affordable price.
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