There was a time a few years ago when if you asked any insurance agent how much premium he should pay for the term insurance plan.
The answer would have been typical, let me check the premium table and I would revert with details. This is not the case anymore. You sitting at the comfort of your office or lounge can go to any company’s website, fill in your details and wait for the calculator to populate your premium.
How to find the competitive priced term plan
In case you are one of the people who believe in professional advice, you can let your Insurance broker or the financial advisor do the search work for you. If, you are the do it myself guy, type cheap term plan in any search engine and follow some comparators site. The onus to check the authenticity of premium still rests with you.
Is there much difference in premium across term plans?
Yes, there could be huge difference in premium from one company’s term plan to another company’s term plan. You will be surprised to know that even between two term plans of the same company, the prices could vary. An interesting observation is that as the sum assured increases the premium is discounted. For e.g. if premium for Rs. 25 lacs sum assured is Rs. 5,000 the premium for Rs. 1 crore sum assured for same term plan could be Rs. 17,000/- (not Rs. 20,000)
Does the premium differ with tenure of the policy?
Yes, as the tenure increases the premium for same sum assured increases. For e.g. If a 30 year old individual pays Rs. 10,000 annually for Rs 50 lacs cover for the tenure of 25 years. For the same cover the same individual would be required to pay Rs. 15,000 if the tenure of the policy is increased to 35 years. The reason why the premium increases is because the insurance company is covering the life assured till the age of 65 as against the age of 55 earlier. The insurance company charges level premium and will not increase the premium as the age of insured increases.
Can you get any discount on standard premium?
Yes, many companies now have differential pricing for smoker and non-smoker. A non-smoker can get discount of up to 50% as compared to smoker life assured.
If a smoker is required to pay Rs. 40,000/- for Rs. 1 crore of term insurance, the non smoker counterpart can get the same cover for Rs. 20,000/-
Similarly, female lives get preferential treatment with regard to premium.
Lately, people with good lifestyle and occupation are further rewarded with discount, but this discount is only offered after the underwriter gives his/her consent. These lives are popularly called preferred non-smoker. Most companies would require initial payment to be paid on non-smoker basis and discount amount cheque is refunded with the policy document.
Can the premium be increased?
Once the term policy is issued, the premium quoted in policy document is not increased. You would be required to pay this premium during the entire tenure to maintain your cover.
In some cases the underwriter may ask you for more premium than standard premium you pay. This is called as loading. If, there is loading in your policy the insurance company would ask for your consent before issuing the policy. If, you do not want to pay additional premium the sum assured can be proportionally reduced or you can withdraw your application. In case you withdraw your application, your premium would be refunded after deducting charges for medical tests.
The term insurance market is normally premium driven; the term insurance seeker should shop around for the best rates. Due consideration should also be given to claim ratio and service track record of the various insurance companies.