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6 things to check before buying life insurance

Last updated on: April 07, 2014 21:14 IST

6 things to check before buying life insurance

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A V Suresh

How high or low will be your policy premium depends upon these.

We all are aware of the important role life insurance plays in the event of unforeseen emergencies. Every life insurance policy has to be bought at a price. Life insurance premium is the price that you pay for securing yourself through a policy.

Every policy has its own premium. You may be charged different premiums from different policies from different insurance companies.

But what are the factors that decide life insurance premium? Let's have a look at them now.

Charges

This is the first of many things that you should be looking at before purchasing life insurance. What type of policy is it? Is it money back, ULIP or term plan?

Each policy is designed in a different way.

Some give protection plus returns whereas some give only returns. Obviously, the one with more benefits will charge a higher premium.

An important factor here is the cost involved such as agent commission, distribution cost, mortality charges, fund management fees, etc. Charges could be recurring or non-recurring.

If these charges are more, premiums will be higher.

Unfortunately, not everybody looks at all these charges before purchasing a policy. It's only when one looks to surrender it that s/he gets to know of these.

Higher charges mean lesser amount would be invested for you and as a result lesser returns generated. Always look out for policies with least charges.

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Age

Age is an important factor in deciding your life insurance premium. Usually, premiums are cheaper for lesser aged people as insurer would be taking a lesser risk in insuring them.

A lot of times medical tests are not performed for younger people who seek life insurance. Hence, costs related to medical tests are also saved for such people.

That's the reason why you should buy life insurance when you are young even if you feel you don't need it yet.

Health

Insurers are more willing to offer life insurance to healthy people as they face lesser risks in insuring them. There are two things that every insurer considers with respect to your health -- past and present.

Every insurance company wants your health history along with your family's health history. Your premium might go up if your family suffers from any diseases.

You need to disclose all your existing diseases and those which you have suffered from in the past. They would also insist on your current health condition.

Your food habits, lifestyle habits such as smoking, drinking, etc all play a crucial role in deciding life insurance premium. These past and present of your health help insurer predict your future.

If you do not disclose some of your health habits, there could be issues during claim settlement in the future.

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Gender

Life insurance premium is not the same for men and women, with other factors being constant.

Statistics say that life expectancy is more for women than men. Hence, there would be slight discount in the rate charged for women as insurers face lesser risk in insuring them.

Profession

Premiums also change with profession. People engaged in few professions face higher risk of death compared to others. Hence, insurers charge a higher premium for getting them insured.

Policies may also be rejected for such people in such professions due to greater risk involved.

Sum assured

Higher sum assured usually attracts higher premium. This is obvious as you need to pay more to get more. For example, a policy worth Rs 50 lakh sum assured would be cheaper than Rs 1 crore cover.

Hence, sum assured is also one of the factors deciding life insurance premium.

Conclusion

These are six major factors which decide the premium of a life insurance policy. Never opt for a policy based on only cheaper premium.

Always do a cost benefit analysis of it. Even though insurance involves emotions, it has to be bought just like any other product.


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