A Guide to Age and Premium While Buying Term Insurance

Gaurav, a 25-year-old non-smoker, recently joined the first job of his life. When he got his first salary, he celebrated with his friends and family, but also took a decision to buy a term insurance plan. When he was searching online for the right product, his manager Sumit, a 35-year-old non-smoker married with wife and kids, wondered as to why he needs to go for insurance at such a young age. Sumit boasted that he never bought a term plan because he was saving it for the right time and he plans on buying it when he turns 40. This was when Gaurav explained to him the financial losses Sumit has suffered and will suffer for taking this important decision so late in life!

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Read on!

Gaurav was going through Max Life Online Term Plus Plan, and he used the premium calculator to explain Sumit. Firstly, Gaurav calculated the premium for himself. At 25 years of age, if he selects online term policy for a sum assured of Rs. 1 crore for a term of 35 years, the premium comes out to be Rs. 6,400/- per annum for basic life cover option.

In the case of 35-year-old Sumit, the premium for the same term plan for Rs. 1 crore for a term of 35 years comes out to be Rs. 11,000/- per annum. However, as Sumit mentioned that he planned to buy insurance when he turned 40, Gaurav calculated the premium for that age too. At 40 years, Sumit will have to shell out Rs. 15,100/- per annum and that too for a term of 30 years.In case he waited a bit longer to buy the best term insurance plan when he turned 45, he would have to shell out Rs. 21,200/- per annum for a term of 25 years.

Did you see the difference in basic premium? There are no riders involved, and if one chooses to add a few of them, the premium will shoot up considerably with age due to the increased risk profile. Even at 35, Sumit is going to pay double for what Gaurav will pay for the same life cover till they both turn 60 years old! That’s like covering your life at a higher cost when you do have an option of saving some money and using it for other priorities!

Term plans give a lot of importance to age as their underwriting parameter when it comes to calculating the premium. The assumption is that a young person will be healthy and less likely to die of natural causes anytime soon. This means he will be able to pay premiums for a longer duration of time. Also, with age, a person is more susceptible to diseases and other age-related ailments that put him into a higher risk category for the insurer. There is an added advantage of selling it online as it reduces the insurer’s administrative costs as well as agent commission. Therefore, an insurance company is ready to offer lower premiums on an online term policy.

It makes sense to buy insurance at a very young age to save on premiums while at the same time get a cover for life-related risks.The premium will be same throughout the term of the policy. So buying early will get you lower premiums which need to be paid throughout the term of the plan. A term insurance becomes the best term insurance only if you buy it at the right age ensuring you get the best deal. here is the list of best term plan in india

Gaurav took the right decision, will you too?

Harjot Singh Narula

Harjot Narula is founder and CEO of ComparePolicy.com, an IRDAI approved insurance web aggregator focussed on selling online insurance for companies. Harjot has more than a decade of experience in software development and has also spent 5 years in US working for the mortgage and risk management industry.

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