Choosing the Right Term Insurance Plan: A Guide to Premium Rates

Rohit started planning for his family’s future the day he celebrated his 2nd work anniversary. He realised his savings wouldn’t be enough in case something happened to him. He earned ₹14 lakh per year, had a home loan of ₹45 lakh, and monthly expenses of ₹70,000. His wife, a homemaker, and their two children depended entirely on his income.

He checked a term insurance plan worth ₹1 crore. The premium cost him ₹1,050 per month for 30 years. He asked himself a few questions, such as: Is this enough? Too much? What’s the right cover?

Here’s what Rohit’s financial situation looked like:

Rohit needed guidance not just on how premium rates are calculated, but also on which plan would be best suited for him.

That’s precisely what this blog will help you with. We’ll help you choose the right term insurance plan, as each plan is unique, just like our dear readers.

1. Start Early to Lock in Lower Premiums

When my mother was 25, she purchased a term insurance policy with a monthly premium of ₹500. A decade later, my father applied for the same coverage at age 35 and was quoted ₹1,200 monthly. Now, they both give me lectures on how starting early not only ensures coverage but also significantly reduces premium costs.

For example, Ravi purchased a ₹1 crore term plan for ₹700 per month at the age of 30. His colleague, Amit, delayed until 40 and paid ₹1,500 per month for the same coverage. If you look at it from a broader perspective, 

Amit has spent an additional ₹9.6 lakh over a 20-year term.

Read More – Term Insurance vs Whole Life Insurance: Key Differences
 

The table compares both of their finances:

2. Choose the Right Policy Tenure

My sister once opted for a 10-year term plan, thinking it was sufficient. However, as financial responsibilities grew, she realised the need for extended coverage. When you decide the tenure for your insurance plan, see how the plan will go with your financial duties in that period. If it provides uninterrupted protection, then go with it.

For example, Meena, 35, chose a 10-year term plan. At 45, with ongoing financial commitments, she had to renew her policy at a higher premium due to increased age. She now pays ₹2,000 per month, compared to her initial ₹1,000 per month.

Here’s how plan renewal impacted her finances:

Over 20 years

3. Assess the Coverage Amount Carefully

Initially, I underestimated the required coverage. So, I opted for ₹50 lakh. Later, I realised it wouldn't be sufficient for my family's needs. ‘Kanjoosi ki bhi hadd hai!’ 

So, learn from my mistakes and be aware that it's crucial to assess your financial responsibilities and future expenses. This way, you can choose an adequate sum assured easily.

For example, Meena is a 34-year-old working mom from Pune. She took a ₹50 lakh term plan. But when her husband listed their financial needs (as shown in the table given below), ₹50 lakh wouldn’t be enough.