How to Get a Life Insurance at Lower Premiums?

Who does not want to get a little more in life with a little less? Everyone loves a good bargain! This holds true for everything we buy in our day to day life, including insurance. Most of us know that life insurance becomes an almost inevitable purchase, when one becomes the bread earner of his or her family. Hence, it is also very important to find out ways to get the best deal while buying life insurance which is a very important financial instrument.

Business-Standard reveals that insurance penetration in India stands at only 3.3%, as compared to the world wide average of 6.2%. This essentially means that Indians are not adequately insured. There are a multitude of reasons behind this, such as the economic condition of India, the reach of the insurance industry, the general financial literacy of the public etc. However, one of the major reasons is the high rate of premium, which makes a common man think twice before buying life insurance plans.

Premium is the price that you have to pay to purchase an insurance plan. You pay the premium only once or for a certain period of time, at a regular basis, and the insurer promises to provide life coverage throughout a pre-determined period of time.

An insurance premium is often defined as the amount you need to pay every thousand rupees of the sum assured. Premium may vary depending on the type of plan you choose, the sum assured amount, the policy term, your age at the time of entry etc. Premium paying modes also depend on the type of policy you opt for as well as on the premium paying terms that the insurance plan offers.

You have to pay your premiums in advance, through cash, cheques, Demand Drafts or through online modes. As per the limit set by IRDA, you can pay up to Rs.50, 000/- at a time, if paid through cash.

Different types of life insurance plans offer different premium rates. If, for instance, you opt for a term insurance plan, you will have to pay less premium amount than that you have to pay if you had chosen an endowment plan. Since term insurance plans are the most basic type of life insurance plans, the premium rates are quite low. The more features and benefits you get the higher premium you have to pay.

If high amount of life coverage is all that you want, term insurance plan is the best option for you. Term insurance plans offer comprehensive life coverage at nominal costs. But it pays out nothing on maturity. So, if you want more than just life coverage, you can opt for other options as well. If you want to save your hard-earned money for future use, go for endowment plans. If you want to invest money for wealth creation, there are ULIP plans to take care of your needs. If you want to invest for your child's higher education or marriage, you can buy a child insurance plan. If you want to systematically accumulate money for your post-retirement life, pension plans are what you need.

All these plans offer life coverage along with other additional features. But the premiums, as already said, are quite higher than that of the term insurance plans. if you want to buy a term life insurance plan other than term insurance plans, and you want to lower your premiums as well, here are a few guidelines for you.

How to Avail Rebate on the Insurance Premiums?

Rebates are nothing but the discounts on premium rates as declared by the insurance company. Rebates are generally determined on the basis of the sum assured amount and the premium paying mode.

Here are a few ways to avail the rebate on the amount of your life insurance premium.

1. Rebate Based on Sum Assured

A number of insurance companies offer rebate for higher sum assured (the sum assured must be higher than a certain threshold). It is possible because, the higher the sum assured amount the lower the servicing cost (collecting, processing and administrative cost) for each unit of the sum assured.It results in higher profits per unit of sum assured or per unit of premium paid to the insurance company. So, if you want to lower your premiums, choose a higher sum assured.

2. Rebate Based on Premium Paying Frequency

Most insurers allow the policyholders to choose from four premium paying frequencies- annual, half-yearly, quarterly and monthly. The higher premium paying frequency means higher servicing cost for the insurance company. This allows the company to earn less return on the premium you pay. For instance, for a plan whose monthly premium is Rs.2, 000/- , the overall yearly premium will be less than Rs. 24,000/-, if paid on an annual basis. So, choose a premium paying frequency (often the yearly is better than the monthly one) that allows you to avail rebate on premiums.

3. Rebate Based on Premium Paying Mode

If the premiums are paid online, the servicing cost of the company will be lower than that if the premiums were paid offline. Moreover, in case of the online sold policies, the companies save a lot of money as they generally do not have to pay commissions to insurance agents. So, if you buy life insurance plans online, you will receive rebate on the premiums.

4. Apart from the ones mentioned above, discounted premium rate offer on the following factors as well:
   • If the policyholder is a non-smoker
   • If the life insured is female
   • If the life insured does not have a history of genetic diseases such as diabetes
   • If the policyholder's occupation is risk free

Age will also affect your insurance premium. The younger you are, the lesser premium you will have to pay, for getting exactly the same benefits that you might have got at a later age. Hence, it is advisable to plan and purchase your life insurance as soon as you start your career (once you are capable of paying the regular premiums).

From time to time, top life insurance companies in India also announce special promotional schemes wherein, they offer good benefits at reduced premium rates. One must constantly keep an eye on such news, to grab the opportunity.

In summary, life insurance is an essential purchase in your life and you must plan well before buying it. By understanding the factors that can reduce the premium, you will be able to plan more effectively. This will in turn reduce the financial burden on you and provide you with more disposable cash for enjoying the luxuries of life with your family.