4 Important Tools for you to Minimize Your Term Plan Premium
When it comes to term life insurance, the major excuse that people give for not having one is the high premium. They usually complain about how the premium will affect their daily lifestyle and pose a burden on their finances. But did you know that several insurance providers, offer their customers with an option to customize the plan according to their requirements? Read on to know more about plan customization and how it can help you reduce the term plan premium.
Term Insurance Plan Customization
In the earlier days, insurance policies were definite. The policies were common for everyone and didn’t have accommodations for any changes. This affected customers who didn’t need some features and still had to pay for those. To boost sales and attract customers, insurers introduced plan customization of term insurance plans. You can modify and choose which components you wish to have in the policy through plan customization. Given below are four important tools whose modification can result in a reduced term plan premium.
Premium Payment Frequency
Premium payment frequency is the time duration between two consecutive premium payments. Insurance providers have several different payments terms as per the customer’s suitability. Some of the common ones are monthly, quarterly, semi-annual, and annual. Monthly payments have the least premium, and multi-year payments have the maximum premium among these. But if you calculate the total annual cost of each payment term, multi-year or annual payment will have a comparatively lower premium amount.
The reason behind this benefit from paying a large sum is that the insurer receives a major share of the premium upfront at the beginning of the policy. When compared with monthly payments, the insurer receives money in smaller portions. So, they give extra discounts on the premium rate with the increase in the frequency, as there is also an increase in the premium amount received at a time. If you can afford such a huge amount at a single time, you must go for it as it will always be cheaper than the rest in the long run.
Policy duration also affects the term plan premium. If you opt for short-term plans, they will have a higher premium rate. But in long-term policies, the premium divides itself over the years, allowing you to have a cheaper premium rate. So, when purchasing a term insurance plan, always ensure that your policy has a longer duration.
Apart from the monetary benefit, a longer policy will also remove the need for frequently renewing policies or looking for new plans. It decreases your trouble submitting fresh documents repeatedly each time you renew or purchase a fresh term insurance plan.
There are several add-ons that can increase the benefits or burdens on you. It is up to you to decide which add-on is necessary and which isn’t. Removing unwanted add-ons will decrease your term plan premium, allowing you access to a term insurance plan with cheap rates. But in the conquest of reducing premium, don’t remove essential add-ons from the insurance like health coverage, savings plans, family plan, accident/third party liability, etc. These are very useful tools whose help people do require sooner or later.
Another indirect method of reducing term plan premium is by opting for a plan with the maximum tax deductions. According to Section 80C of Income Tax Act, 1961, most term insurance plans allow a maximum deduction of INR 1,50,000 in the taxable income while filing ITR. There are added other benefits depending on the age of the policyholder. So, if you are a taxpayer and consider these tax deductions, your premium rate can effectively reduce to an affordable range. However, tax laws are subject to change from time to time.
With the help of these four components, you can substantially decrease your premium amount. There are several other similar things in the term insurance plan whose variations can help lessen the premium burden. As discussed earlier, plan customization helps you choose and modify these features.