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Wednesday, October 13, 2010

How to save on Insurance premium

With inflation at an all time high of 9%, everyone is thinking of how to reduce their bills. If one can save on the insurance premiums, it will definitely not hurt. The total cost of your health, life and auto insurance policies puts you back by a few thousands every year. If you have bought a traditional plan, the sum would be well over 50K per annum, so even a 25% cut in that expense can help you save INR 12,500. You must be wondering if that’s possible without compromising on the total sum assured and we would say ‘Yes,that’s possible”.

Quit Smoking

Companies like Birla Sunlife, Kotak Life, Max New York Life and Met Life have special term plans to offer to non-smokers, which are cheaper by 20-40%. For example, a 30 year old man who is a non-smoker can buy a Rs 25 Lakh preferred term plan from Kotak for Rs 3943 a year, however a smoker of the same age will have to cough up Rs 1500 more for the same plan. Over a 25 year period, a non smoker can easily save Rs 37,500- and not to mention all that one would save on cigarretes! There’s a catch here that these schemes are not available for term plans with a lower cover. For example, Kotak and Met Life offer this discount only if the sum assured is more than Rs 25 lakh. So one must compare these special policies with other term plans and opt for the cheapest option.

Pay Annually

Higher the premium payment frequency, higher is the premium outgo due to loading. For a 40 year old male, a 25 year term plan with Rs 25 lakh sum assured from Aegon Religare would cost Rs 987 per month or a total of Rs 11,844 for a year. However, if annual payment mode is chosen, the premium would be Rs 11,350 which is Rs 500 less than the monthly payment mode.

Go for Family Pack

Individual health plans are always expensive and you are most unlikely to use up the entire cover. For instance, if you have a family of 4 and you have bought individual policies of Rs 5 lakh each, you’ll have to shell out anywhere around Rs 30,000 for the same and the total medical expenses of the entire family would rarely touch Rs 20 lakhs. So, it’s far better to go for a family floater health insurance plan under which all the family members can share a cover of Rs 5 lakh. One can thus save around Rs 10,000 a year. And if you have a chronically ill or old person at home then it’s always better to get an additional cover for them.

Use Group Advantage

One can also reduce the health premium covers by extending the employer-sponsored group insurance to his/her family. These plans are 20-25% cheaper than family floater plans. The actual cost of these plans depends on the scope of the cover, past experience of the insurer with the company and the number of employees in the organisation. But they are certainly cheaper that individual or floater plans.

Apart from all this, different insurers offer different rates for similar policies. It is very difficult to get a good sense of the rates and do a price comparison unless you do thorough comparison of insurance premiums online through sites

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