Life Insurance

8 Smart Ways To Get Your Life Insured For Less

Nov 27, 2021

There is an old saying, ‘nothing is certain except death and taxes’. None of us likes to dwell on either but we do take measures to save taxes. Now, science has not yet progressed to the point where we can avoid death itself. But you can take measures to protect your family’s future. One of the best ways of doing this is by purchasing life insurance coverage. A smart investor looks for ways to get the highest return on their investment. For life insurance, this means getting your life insured without breaking the bank.

What is life insurance?

A life insurance policy is an agreement between a policyholder and an insurance company. The insurer pays a sum of money to the policyholder either after a stipulated period or upon the death of the policyholder. 

What are some life insurance terms to know?

The coverage period is the period during which the policyholder is insured by the life insurance company. The lump-sum amount that the insurer pays the policyholder upon surviving the set period is called the maturity benefit. On the other hand, the death benefit is the amount that the insurer pays the policyholder’s beneficiaries upon the death of the policyholder during the coverage period.

What are the different types of life insurance?

The different types of life insurance policies available in India are as follows:

  1. Term insurance policy: 
    The Termhis insurance policy provides coverage for a set time, anywhere between 10 to 40 years. This policy plan is a basic pure term type of insurance plan. Upon the death of the policyholder during the coverage period, the death benefit is paid to their beneficiaries. 
  2. Endowment policy: 
    These policies are similar to the term insurance plans with an added benefit of maturity benefit paid to the policyholder if they survive the maturity period.
  3. Money-back policy: 
    Similar to endowment policies, this plan provides survival benefits. Here the survival benefit amount is paid periodically to the policyholder over a period of the policy term.
  4. Unit-Linked Insurance plans (ULIP): 
    These plans provide life coverage as well as help to build a financial corpus by investing in marketable securities.
  5. Annuity plan: 
    The policyholder invests a lump sum amount which is invested by the insurance company. Thereafter, the policyholder receives regular payouts with the returns generated by the investment.
  6. Whole life policy plan: 
    Most other insurance policies provide coverage for a set period. But this policy extends for the whole life of the policyholder. This plan also provides survival benefits. This plan allows the policyholder to partially withdraw the sum assured amount.

How can you insure your life for less?

Life insurance is an indispensable means to secure your family’s future. But in these uncertain times when job and financial insecurity is rife, is there to get your life insured for less? Yes; here are eight smart ways to do so:

  1. Buy early: 
    It is common for middle-aged people to buy life insurance coverage. This is a pity because the earlier you buy life insurance, the cheaper your premiums will be. Insurers consider various factors when setting a premium amount. These factors include your age, medical history, and current health conditions, and so on. When you are young, your health would typically be in a better condition than older people. Your medical history would likely be less complicated. So you would get life insurance coverage at a lower premium than a person 10 to 20 years older than you. Suppose you buy life insurance when you are in your 20s. You can get a large coverage for 40 years at quite a low premium. 

     
  2. Choose the CHEAPEST life insurance policy: 
    Term insurance is a pure form of life insurance. The policyholder pays for pure life coverage. There are no maturity or survival benefits. The insurer only pays a death benefit to the policyholder’s beneficiaries. For this reason, term insurance is the least expensive type of life insurance. If your main goal is to provide financial security to your loved ones, you can choose a term insurance plan.

     
  3. Choose the ideal insurance plan type: 
    Term insurance is the best form of life insurance if you want to save money. But it may not be the one for you. Perhaps you want one that will provide a maturity benefit or survival benefits. In that case, you should research all the different types of life insurance plans available. Perhaps a whole life plan may be more suitable for your needs. If you already have mutual fund investments, does it make sense to buy a unit-linked insurance plan? If you have other investment vehicles that will provide regular income, do you need a money-back policy plan? These are the questions you need to ask yourself prior to choosing an insurance plan type. Research and shop around before settling for a plan.

    Moreover, before settling for any plan, use online insurance premium calculators to estimate the premiums for each type of insurance plan. This groundwork will help you choose a plan and a premium amount that works best for you.

     
  4. Choose your optimal coverage- not more
    An old rule of thumb was that your life insurance coverage should be 10 times your current annual salary. However, inflation and high costs of living mean that even 10 times may be inadequate. To be on the safe side, your coverage amount should be a minimum of 15 to 20 times your annual income. Your sum assured should enable you or your beneficiaries to maintain your prevailing lifestyle.

    Other than the broad rule of thumb mentioned above, there are two other major factors to consider. 
    1. Dependents:
      One is, the kind of financial resources your dependents would have after your death. For example, any assets and resources, like property or stocks and shares. 
    2. Financial need of your dependents:
      The second factor is what financial needs your dependents would have after your death. These include final expenses, income requirements, and pending debts.  

Once you estimate these two factors, you should subtract your dependent’s financial resources from their financial needs. This will give you a more precise estimate of the coverage amount you should take. 

Your coverage amount should not leave you either over-insured or under-insured. These careful calculations will help you circumvent both extremes.

  1. Decide if you need insurance riders: 
    Insurance companies offer insurance riders additional coverage. This, of course, comes at the cost of additional charges. But you may not need insurance riders at all. For example, if you do not have a dangerous occupation, you may not require an Accidental Disability and Death Benefit Rider. If you must choose a rider, opt for one that is really required. For instance, if there is a history of cancer in your family, it would make sense to take a Critical Illness Rider. If you feel that there is no need for any rider, by all means, avoid taking one.

     
  2. Go online: 
    Nowadays, most insurance companies offer online insurance plans. Not only are they more accessible and easier to apply for, but they are also often cheaper. Online insurance cuts out the middleman. There is no broker on commission to sell you a plan. You do not need to enter any office premises to fill up and sign a paper form. Therefore, the insurer does not have to pay electricity charges, rent, and more. Hence, these plans do away with extraneous costs. This results in a net positive for policy applicants. As extra costs are removed, the resulting premiums are lower than what you would get via offline plans. Moreover, the entire application process is quicker and hassle-free. You can apply for the insurance policy from anywhere as long as you have a working internet connection. You could be in a tiny town in the depths of the Western Ghats or glamorous New York. It makes no difference. Keep soft copies of your KYC documents in hand and you are good to go. 

     
  3. Look for discounts: 
    At times, insurance companies offer discounts on life insurance coverage. Watch out for these discounts as they can make a big difference to your premium payment. Insurers often offer discounts through online portals and on online plans. Remember, insurance companies are cutting down costs by offering online plans. So, it is no wonder that some of the best discounts are on online plans.

     
  4. Be regular with your payments: 
    One of the worst ways you can drive up costs on your life insurance is by being late on your premium payments. Insurers charge a late fee when you miss the due date on your premium payment. These fees can add up and create a significant hole in your pocket. Don’t let that happen to you. Keep a reminder every month to pay your premium. You can arrange for an auto-debit from your bank account. And when budgeting for expenses, always account for your premiums.

Take away

Keep in mind that being healthy also goes a long way in lessening your premiums. A healthy individual who does not smoke will pay a lesser premium amount than someone of the same age who is a smoker. Either way, do your due diligence before purchasing life insurance coverage. With proper research and strategy, you can get your life insured for less. Just remember to plan accordingly so that you are adequately insured.

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