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Why Premium Amount for Term Insurance is So Low?

Term insurance premium is the lowest as compared to other traditional life policies premium. Click here to know the reasons why term insurance is a low premium insurance.

  • Aug 30, 2019

Life is uncertain and an unfortunate event may leave your family in financial jeopardy if you do not procure insurance coverage. Traditional life insurance plans include money back and endowment policies. These plans provide the policy benefits to your beneficiary in case of an unfortunate event. Moreover, these plans to offer a maturity benefit on survival. However, traditional life insurance plans are expensive. A cheaper and more affordable alternative to avail of insurance coverage is to choose a term plan. This type of life insurance plan pays the benefits to your loved ones if something untoward happens to you during the policy duration.

One advantage that term insurance plans have is that the premiums on these are lower as compared to traditional life policies.

Here are four reasons why the term insurance premium is lower:

1. Lesser bifurcations

When you choose investment-based insurance plans, there are a higher number of bifurcations. The total premium paid on such policies is used towards administrative charges, mortality costs, and investments. Therefore, the total cost of the policy is higher. In comparison, the low premium on a term insurance plan is bifurcated only between the mortality charges and the administrative costs.

2. No maturity benefits

Most of the traditional life insurance plans offer maturity benefits in case you survive the policy duration. In addition to life cover, such policies provide investment returns too. On the other hand, a term policy is a low-cost insurance option because it does not provide any maturity benefits. The policy benefits are paid to your family members only if an untoward incident occurs during the tenure of the term plan.

3. Policy duration

A regular term insurance policy offers coverage for a specific period. The total policy duration also impacts the premium amount. The relationship between policy duration and premium is directly proportionate. This means that as the duration increases, the premium amount also becomes higher and vice versa.

4. Healthy lifestyle

Most insurance companies may ask you to undergo medical tests when you apply for a term plan. Additionally, you need to provide information about your habits such as smoking or alcohol consumption. If you follow a healthy lifestyle and do not have any medical conditions, the insurance companies perceive you as low risk. This means the possibility of you filing a claim against the policy is lesser. Therefore, the insurer can offer you low premium insurance coverage.

Life insurance coverage is crucial and the premium payable on the policy is an important consideration. You do not want to avail of a policy for a higher premium and then find it financially difficult to sustain the renewal costs in a timely manner. If you fail to pay the premium on time, you lose the benefits and the insurance coverage, thereby exposing you to higher risks.

The insurance industry has seen several changes during the last few years. Another way to reduce the premium cost is to opt for a term plan online. The insurance companies can reduce their administrative costs and eliminate agent fees when you buy online. The savings are then passed on to you through a lower premium.

Before you buy an insurance policy, it is important to understand the coverage required. An online term insurance calculator can help you determine the adequate cover. Check today and procure the coverage without any delay.

Kotak e-Term

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  • Life Cover till 85 years for Life & Life Secure Option
  • 3 Payout Options
  • Special Rates for Women
  • Option to exit the policy with premium refund at the age of 60*
  • Special Rates for Non-Tobacco Users
  • Free Medical Check Up every 5th year**

Ref. No. KLI/22-23/E-BB/2435


- A Consumer Education Initiative series by Kotak Life

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