There are several parameters that you need to analyse to take a conscious decision before buying life insurance. This article highlights some of the important factors you need to consider while buying a life plan.
Yes, term insurance and whole life insurance are both life insurance policies. But, there are a few glaring differences between the two that set them apart.
Whole life insurance policies are designed to offer Death Benefit as well as Maturity Benefit, unlike Term Insurance Policies that offer Death Benefit only. Death Benefit is the sum assured payable to the policy’s beneficiary on the policyholder’s death during the policy term. Maturity Benefit, on the other hand, refers to the sum assured, along with accrued bonuses and Survival Benefits, payable to the policyholder on the completion of the policy term.
Whole life insurance policies are classified into two categories – Traditional Whole Life Plan and Unit Linked Insurance Plan (ULIP). Traditional Whole Life Plans are further classified into participating and non-participating whole life insurance plans.
Now that you’ve got a fair idea about the basics of life insurance policies, let’s move on to discuss how to get the maximum benefit from your life insurance policy by paying the least possible premium.
How to save money with your life insurance policy?
1. Age: The younger you are when you buy life insurance, the lower will be your premium.
2. Policy tenure and sum assured: The longer the life insurance policy term and the higher the cover opted for, the higher will be your premium. With a higher life insurance premium, you will be eligible for a better coverage. If you want to cut down on your life insurance premium, you can consider a plan of a shorter tenure.
3. Lifestyle habits: Lifestyle habits like excessive smoking and drinking impact your health negatively, thus, increasing the premium that you will be eligible for. Having a family history of such diseases also increase the premium on your life insurance. This is because you will need a comparatively higher coverage for your unhealthy lifestyle practises.
However, you can save on your premium by maintaining a healthy lifestyle for a considerable period of time to improve your medical parameters. This will enable you to negotiate with your insurer regarding your premium.
4. Current health condition: Pre-existing medical conditions like cancer, diabetes, etc. automatically increase the premium on life insurance policies. Not just that, incorrect or concealing any information regarding pre-existing diseases also has the same effect on your premium.
5. Add-on riders: You can enhance your base life insurance plan by adding riders at an additional cost since these riders are not compulsory, you need to select them with discretion. Sometimes, individuals tend to opt for all the available riders, despite their need for each one of them. Select only the ones that suit your unique needs to save on unnecessary premium payments.
6. Premium payment frequency: The options for premium payment frequency that are generally offered are single payment, annual, bi-annual, quarterly and monthly. Single and annual payment options bring down your life insurance premium as you save on the administrative charges that are applicable on the other premium payment frequencies.
7. Online purchase: Online life insurance plans are available at a lower premium because it excludes the commission charge of the insurance agent as well as insurer’s administrative charges, which becomes applicable for life insurance purchased online. Such online plans are increasingly becoming more popular with most leading insurers offering their customers the convenience of buying a life insurance through their websites.
Financial Benefits of a Life Insurance Policy
Let’s take a glance at the financial security offered by a life plan.
- Helps you to be financially prepared for planned and unexpected exigencies well in advance.
- Offers either Death Benefit or the dual advantage of Death Benefit and Maturity Benefit.
- Death Benefit is payable to the beneficiary of the policyholder on his/her demise during the policy tenure.
- Maturity Benefit implies to the sum assured, along with bonuses, which is payable to the policyholder on the maturation of the policy tenure.
- While term life insurance offers only Death Benefit, whole life insurance policies offer a combination of both. You can opt for either of them as per your insurance objectives.
- Keeps your family financially safe, even if you are not around. It not only provides for their daily expenses, but enables them to repay loans (if any) and fulfil their future ambitions and aspirations.
This Or That – Which Life Insurance Plan Should You Opt For?
Here are 3 simple rules to help you choose the right plan.
- Meets your objectives: Are you looking for Death Benefit only? Or, both Death Benefit and Maturity Benefit. Buy your life insurance accordingly.
- Budget-friendly premium: The host of life insurance companies specialize in offering a plethora of life plans, each of which are designed to cater to varied needs of individuals across ages, medical conditions, insurance objectives, etc. One of the most effective ways of saving on premium is to buy life insurance online to cut down on administrative charges payable to the insurance agent, which is applicable on offline purchases.
- Type of payout: The payout that best suit your requirements depend on your objectives. If you are looking for financially securing your family in case of your sudden death during the policy term, term life insurance policy should be your choice. In case you want a life insurance policy that will cover you for your entire life, whole life insurance policy is the way to go.
To wrap it up…
There is nothing called as the ‘best life insurance plan’ because one size doesn’t fit all. So, the catch is to opt for the one that best suits you and your family’s need. Know your requirements and the benefits offered by various policies to buy life insurance that suits you to the T.