If you have liabilities such as a home loan, car loan, personal loan, or you have financial dependents and you wish to financially provide for them in your absence, you are one of the people that needs life insurance. When buying life insurance, it is better to opt for a term plan, rather than opting for a traditional insurance policy such as a money-back policy or an endowment policy, as the term plan was the original life insurance product, and hence is pure life insurance without any investments mixed in. And when opting for a term plan, you have the option of choosing either an offline or an online term plan.

If you decide to buy an online term plan, it is advisable to do a little research before choosing a policy. Not only is this a sound way of taking a financial step, it can also pay off by way of getting you a higher sum assured for a lower premium!

Let’s take HDFC’s Click 2 Protect policy as an example of one of the policies available today that offers higher Sum Assured for a lower premium, and see how this works:

Our favourite fictional character, Mr. Shah, checked out his insurance requirement as part of his overall financial planning process and was advised that considering his existing liabilities and financial dependents, he has a term insurance requirement of Rs. 40 lakhs.

Mr. Shah wants to buy Online Term plan to meet this requirement. He searched quotes for HDFC Click 2 Protect an Online Term Plan. Following is the quote he got a quote from the HDFC Life website as follows:

HDFC Click 2 Protect
Age	30 years
Term	20 years
Sum Assured	Premium
Rs. 4,000,000	Rs. 6,022
Rs. 5,000,000	Rs. 5,730

Mr. Shah was amazed to see that the insurance cover he wanted of Rs. 40 lakhs costs Rs 6,022 while the higher sum assured of Rs. 50 lakhs costs just Rs. 5,730 which is Rs. 292 less, even though his sum assured was higher by Rs. 10 lakhs.

He chose to go for the higher sum assured, after his financial planner explained how this was possible for the insurance company.

Reason for Lower premium for a higher Sum Assured:
When you opt for a lower sum assured of less than 50 lakhs, insurance companies in Online Term plans generally do not ask you to go for Medical Tests, so there are higher chances of full health history not disclosed by the person taking the insurance cover. So the insurance companies’ charges higher premium for taking greater risk, but when you go for a sum assured of Rs. 50 lakhs or more, you have to compulsorily undertake medical tests for your health insurance policy. In such a scenario, insurance companies have the option of declining the policy in case the medical reports are not satisfactory for providing the insurance cover. Medical tests ensures that health of the life to be assured is good enough for providing insurance cover which decreases the risk for the insurance company and in lieu of lower risk, the insurance company provides discount on premium.

Most people are unaware about this fact and end up paying higher premiums and getting lower sum assured. Further HDFC is not the only insurance company which provides discount for taking higher sum assured, there are other companies as well.

At PersonalFN, we recommend that you should always disclose all the health history while taking any insurance policy. Also, there are certain things to keep in mind when choosing a health insurance policy. It is also recommended that you go for the required medical tests before taking the insurance policy so that there is no reason for the insurance company to decline claim in the name of non-disclosure of health history at the time of taking the insurance policy.

PersonalFN is a Mumbai based Financial Planning and Mutual Fund Research Firm.