Oct 27, 2017 12:55 PM IST | Source:

Buying life insurance? Why premium rate should not be only deciding factor

It is important for an individual to carefully weigh the product features as per their own suitability and life stage.

Navneet Dubey @navneetdubey91

Are you scouting for a life insurance cover? You may be comparing insurance plans and considering buying a cover that comes with the cheapest premium payment. But is that a good way to shop for an insurance cover?

“Premium should not be the single factor influencing the purchase decision of the buyer. The need of the customer, supporting features of the product and benefits are essential to evaluate. It is important for an individual to carefully weigh the product features as per their own suitability and life stage,” said Rushabh Gandhi, Director - Marketing and Sales, IndiaFirst Life Insurance.

Generally, if one buys an insurance plan early, say in their 20s, the premium will be less than if you are in your 30s, 40s or even later. However, one should know that the premium applicable to you depends on a various other range of factors also. Therefore, one should not totally depend on factoring lower premium price only.

Here are the steps you should take while buying an insurance plan:

Know your need before purchase

Insurance should be bought on the basis of the total protection you need. This need can be calculated by HLV (human life value) method or more accurately by the insurance need based method. In case you are not able to do it yourself, you should take the help of a financial adviser to calculate the sum assured required to protect your family.

“While choosing a pure life insurance, always look for good coverage, sum assured, claim settlement and add-ons that your insurer is providing. Keep in mind the add-ons offered by the plan as they offer additional protection against accidental death, disability, and critical illness – it provides additional protection over and above the base plan for a small extra cost. Go for plans that give you coverage for a longer period of time as people tend to work well past their 60’s and buying protection plans at that age would be expensive. The trick here is to invest at an early age so that your premium rates would be low and you can lock the price,” said Santosh Agarwal- Head of Life Insurance,

Know your payment capability

Do not buy a policy which you cannot afford. Remember you are buying the policy to cover the financial losses and not merely to save tax every year. “Some standard aspects such as age, gender, policy and premium paying term, and sum assured are among the determining factors to arrive at premium rates for a given individual’s life insurance cover. However, the range of features available in the given plan that enrich the benefits for the customer may also impact the price,” said Gandhi.

Study the options

While buying a pure protection plan or term plan one should know which option is better to get maximum coverage and riders. On the other hand, buying many policies can affect your monthly budget severely. “Term plans are primarily to set up a security fund for your dependents in case of an unfortunate event, hence you should go for riders,” said Agarwal.

For example buying a simple term plan may cost you less and provide you a higher cover as compared to the term insurance plans with “Return of premium” option, where the insurer needs to ensure that in the case of customer survival, the entire premium is refunded to them. In such case cover provided to you will be same but the premium amount may admirably go high.

Compare the market offers

Once you have decided all the aspects and the sum assured to cover your family getting sufficient cover, after that you should always compare the premium rates of a similar product as the rates and offer differs from company to company. Further, every insurance company has a different mortality experience and risk assessment because of which their products’ rate differs. Therefore, one should take a holistic view of the insurer's capabilities that include availability and network, servicing options, digital connectivity and instant resolution apart from promoter strength and ability to pay claims.

Individuals should ensure that he/she gets the lower premium rates which primarily depends on how healthy you are leading your lifestyle. Gandhi said that a lot of things are in our control including staying away from smoking or other forms of tobacco consumption, and alcohol indulgence. Also be heedful of maintaining an average body mass index. “Some things, not in our control, that may impact the premium rates you pay could be your family’s health history, current health condition or riskiness levels of your profession,” he added.

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