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A new term plan will cost less than old one

Competition, Online Distribution, Higher Life Expectancy Lead To Steep Fall In Premium. At a time when inflation is impacting every aspect of life, the cost of term life insurance has dropped dramatically in recent years. For a few thousand rupees, individuals can buy a Rs 1 crore policy thanks to competition, online distribution and improvement in life expectancy. The drop in prices has been so sharp that an individual who has brought a policy a few years earlier can now get a cheaper cover despite falling into a higher age bracket. Experts now say that policyholders have an opportunity to save money by buying into a new cheap cover and discarding the old one.

Unlike health insurance, the instalments for term insurance (policies which pay out only if the insured dies are ‘level’ premiums. What this means is that although the risk of death rises with age, the premium is computed by calculating the risk for every year and levelling it across the tenure of the policy.

So the same individual will pay a higher annual premium if the term of the policy is higher.

September 2015
Delhi -India