Life insurance, as we all know, is important to protect one’s family against financial difficulties should the breadwinner meet with an unfortunate eventuality. Further, among the various types of plans available, ‘Term Policy’ is the most economical and the most convenient policy to achieve that objective. (In many cases, you can safely ignore the more expensive and inflexible ‘Permanent Life’ plans).
Nonetheless, even though it is the cheapest option, there are a couple of unique ways that can help you in further reducing the total premium out-go.
1. Restructuring your policies
Depending on your age, such policies would normally have a term ranging for 10 to 30 years. However, you need not stick to the same plan for the entire tenure. Since term policies do not accumulate any cash value, you lose nothing if you do not pay further premiums and let the policy lapse.
Insurers revise the policy premiums rates from time to time. Increased longevity is one the common reasons for reduction in life insurance premiums. Or higher competition could compel insurers to trim down their premium rates. Therefore, if after a few years, you are getting the same cover at a lower cost, you can always close the old policy and start a new one.
Caution: First buy a new policy and then close the old one.
2. Buying multiple policies
Instead of one policy for the total Sum Assured, spread your cover over two or three policies. Suppose you desire a cover of $500,000 to insure the day-to-day living expenses of the family. Then buy two policies for $150,000 cover each and one for $200,000 cover.
As years go by and you keep building your retirement/investment corpus, your need for insurance will progressively reduce. Thus, you can keep closing your policy one by one and save on premium costs.
Further, buy separate term policies to cover your mortgages. Don’t club them with the policy that covers your living expenses. This would enable you to close them as soon as the mortgages are paid off and thereby reduce the total expenses on premium payments.
The aforesaid strategies will substantially cut down the total premium that you would be liable to pay over the entire term.
These strategies are, of course, over and above the various standard conditions to be eligible for a lower premium viz. if you buy your policy at an early age, if you are a non-smoker, if you lead a healthy life-style etc.