In one of our earlier articles on essential financial tips for Young Adults we covered the importance of buying Life Insurance. The reason for needing to are many, but to put in very briefly – and starkly – in a country where you can die due to a pothole on the road, a too-wide gap between the exit of your train and the platform, or due to your choice of diet, every young person must ensure that while their loss can never be compensated, at least the financial burden on their survivors can be minimised.
Life insurance, as we have covered elsewhere, is a contract between the insured (you, for the purposes of this article) and the insurer (the Insurance Company from which you choose to buy your Policy), under which, in the even of your death, the insurer agrees to pay a fixed amount to the person named as the beneficiary by you at the time of taking the policy. The insured is required to pay a premium to the Insurance Company, which is also a fixed amount to be paid (typically an annual payment, though quarterly and monthly schedules also exist) in order to keep this contract in force. The amount of this premium is fixed at the time of first entering into the insurance contract and generally this also remains fixed for the duration of the policy.
Now, assuming that you do not actually enjoy parting with more of your hard-earned money than is absolutely necessary, we can safely assume that you are interested in lowering this premium. But how does one do that? Well, for this we need to understand what goes into determining the premium. Essentially, the Insurance Company takes into account a number of factors related to your health, and arrives at a deterministic probability of your likelihood of surviving the period of the policy. The lesser this probability is, the more they will want you to pay for taking the risk of having to pay out the policy amount if you die.
So let’s look at a few things you can do to lower this probability and with it, your insurance premium:
Seriously. Cannot emphasise this enough. You won’t just save a lot of money (how much does a packet cost now?) on buying the things, but this will bring down your premium significantly. Lying about it to your agent does not work either – if you die from a tobacco-related disease and the Insurer can prove you were a smoker, your beneficiary will NOT get the payout. It is considered Insurance fraud.
Premium rates are linked to your age. The younger you are, the healthier you are presumed to be. Premium rates increase steeply for various age slabs. So do not put it off. Go out there and buy your policy.
A clean driving track record will not only bring down your auto insurance quote, but also your life insurance premium. Having a clean driving record shows you are a responsible citizen – and lowers that all-important probability of dying young.
No escaping the fitness brigade. If your weight is within the normal range for your age and height, you are seen as a healthier person with an expected higher life expectancy. If not, the Insurance Company is likely to quote a higher premium to you in order to cover the additional risk.
Do not opt for unnecessary riders
A rider is an additional cover to the basic insurance policy. Many insurance agents try to sell these to you along with the policy, but be aware that each rider has a cost attached to it. Only opt for the one’s you need.
Opt for Term Insurance
While we have covered this issue in great detail here it cannot be emphasized enough. A term policy is the most basic kind of Life Insurance Policy, without any ‘investment’ or ‘money-back’ angle to it. Unglamorous as it sounds – and though your agent / banker will try to dissuade you from buying it, it genuinely is the best option around – and costs a fraction of the other types. We strongly recommend reading the linked article on this issue as well.
Life Insurance is a necessity in today’s world. We hope the tips above will help you to save money when buying a policy. After all, it’s your life you want to secure, not the Insurance Company’s bottom-line.
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