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Is it Possible to Reduce Life Insurance Premium without Affecting Sum Assured?

If you're looking for the answer if you can lower your life insurance premium without compromising your coverage amount, you're in luck!

  • 6,506 Views | Updated on: May 22, 2024

Absolutely! It is possible to reduce your life insurance premium without affecting the sum assured. Life insurance premiums are typically determined based on various factors, including your age, health condition, lifestyle, and the coverage amount.

Life insurance serves as an ideal tool to help you cover the risks associated with uncertainties in life. A life insurance plan will provide your family with adequate financial security in your absence. It is one of the most effective ways of securing the financial future of your loved ones. The sum assured will be paid to the nominees in case of an untoward event. If you survive the term, you will be entitled to receive maturity benefits as well.

Difference Between Premiums in Life Insurance and Term Insurance

Many are of the opinion that a traditional life insurance policy and a term insurance plan are the same. A traditional term plan does not offer any maturity benefits to the policyholder. It only offers a death benefit in the case of the policyholder’s demise during the term of the plan. However, as mentioned above, a life insurance plan offers benefits for survival. In addition, term life insurance premiums are economical as compared to the premium payable in the case of a traditional life insurance plan.

Ways to Reduce Life Insurance Premiums Without Affecting the Total Coverage

Life insurance premiums are the cost you pay to maintain coverage, and finding ways to reduce them while keeping your total coverage intact can be a smart financial move. Listed below are different ways which can help you reduce your term life insurance premium rates.

Keep Occupational Activities in Mind

Various professions come in the category of high-risk activities. You need to keep them in mind when you buy an insurance plan. These high-risk professions include defense activities, adventure sports, the chemical industry, and firefighting, among others. In cases like these, there will be a high insurance premium. If you are in any of these professions, you will have to pay a high premium amount.

Quit Smoking

It is a well-known fact that insurance companies charge higher insurance premiums for smokers. This is because of the risk associated with their health. The insurance company does not consider the frequency of smoking. Whether you are a chain smoker or an ‘occasional smoker’, an insurance company will consider you as a smoker, and you will be a high-risk investment for them. The term insurance premium will be high for smokers. Hence, if you are a smoker and wish to reduce the payable premium amount, you need to stop smoking.

Inform the Insurance Company about Pre-Existing Medical Conditions

You might be asked to go through a medical test at the time of purchasing a policy. You need to be very honest about your health conditions during that point in time. If you have any pre-existing medical conditions, you need to define them and document the same. Many insurance companies charge a higher premium for applicants who have a pre-existing condition because it increases the risk for the company.

Factors Impacting Life Insurance Premium

Life insurance is a crucial financial tool that provides peace of mind and financial protection to your loved ones in the event of your untimely demise. However, paying hefty premiums for life insurance coverage can often be a concern for policyholders. The good news is that it is possible to reduce your life insurance premiums without affecting the sum assured and unlock potential savings.

Start Early

One of the most effective ways to reduce life insurance premiums without compromising the sum assured is to start early. Insurance premiums are generally lower for younger policyholders as they are perceived to have a longer life expectancy. By purchasing a life insurance policy at a younger age, you can lock in lower premiums for the duration of the policy, potentially saving you thousands of dollars over the life of the policy.

Choose the Right Policy Type

Another key factor that affects life insurance premiums is the type of policy you choose. Term life insurance policies, which provide coverage for a specific term, generally have lower premiums compared to permanent life insurance policies, such as whole life or universal life, which provide coverage for the entire lifetime of the policyholder. Opting for a term life insurance policy can result in significant cost savings while still maintaining an adequate sum assured to meet your financial goals.

Compare Quotes from Multiple Insurers

Just like any other purchase, it’s important to shop around and compare quotes from multiple insurance providers to find the best rates. Insurance premiums can vary significantly among insurers, even for the same coverage amount and policy type. Take the time to obtain quotes from multiple insurers and carefully review the coverage, riders, and terms of each policy to make an informed decision. This simple step can help you uncover potential savings and lower your life insurance premiums.

Maintain a Healthy Lifestyle

Your health plays a significant role in determining your life insurance premiums. Insurers often conduct a medical examination and review your health history to assess your risk profile. Maintaining a healthy lifestyle, such as quitting smoking, exercising regularly, and managing any existing health conditions, can help you qualify for better rates and reduce your life insurance premiums. Additionally, some insurers offer wellness programs that provide incentives, such as premium discounts or cashback, for policyholders who demonstrate healthy behaviors.

Opt for a Level Premium Policy

Another strategy to reduce life insurance premiums without affecting the sum assured is to opt for a level premium policy. In a level premium policy, the premium remains constant throughout the policy term, whereas in a stepped premium policy, the premium increases periodically. By choosing a level premium policy, you can lock in a consistent premium amount, which can help you better plan your budget and avoid unexpected premium hikes in the future.

Review and Update Your Policy Regularly

Life changes, such as marriage, the birth of a child, or a change in your financial situation, can impact your life insurance needs. It’s essential to review and update your policy regularly to ensure that you have adequate coverage and are not paying for unnecessary riders or features. As you review your policy, you may identify opportunities to reduce your premiums by adjusting your coverage amount, removing unnecessary riders, or updating your beneficiary information.

Wrapping Up

You need to be very transparent with the insurer while buying the policy. If the insurance company discovers that you misrepresented any medical information, they could refuse your claim at a future stage. Keep these three factors in mind if you want to enjoy a low premium amount on your life insurance plan.

Key takeaways

  • Life insurance premiums are the cost you pay to maintain coverage, and finding ways to reduce them while keeping your total coverage intact can be a smart financial move.
  • Yes, it is possible to reduce life insurance premiums without affecting the sum assured. One way to do this is by selecting a longer policy term, as premiums are usually lower.
  • One of the most effective ways to reduce life insurance premiums without compromising the sum assured is to start early.
  • Just like any other purchase, it’s important to shop around and compare quotes from multiple insurance providers to find the best rates.
  • Another strategy to reduce life insurance premiums without affecting the sum assured is to opt for a level premium policy.

FAQs


1

Why is my life insurance premium different from my peer who is of the same age?

Life insurance premiums are determined by several factors, and age is just one of them. While it may seem puzzling that your life insurance premium differs from your peer of the same age, there are several reasons why this might be the case.



2

How does comparing term insurance policy help in making the right choice?

Comparing term insurance policies is a crucial step in making the right choice when it comes to protecting your loved ones’ financial future. Term insurance is a type of life insurance that provides coverage for a specific term or period, and comparing policies can help you in several ways



3

How can I get an estimate of the term insurance premium?

Getting an estimate of the term insurance premium is a crucial step in planning for your financial future and protecting your loved ones. Term insurance is a type of life insurance that provides coverage for a specified term and pays out a death benefit to the beneficiaries if the insured passes away during the term of the policy.

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

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