Buying health and life insurance is quite important to achieve financial security. However, they can dent your budget if not properly planned. Using tools such as a health insurance premium calculator and selecting the right term insurance policy, you can find a good balance of profitability and coverage.
Understanding Health and Life Insurance
Health insurance plans help cover hospitalisation expenses, either by reimbursing costs or by providing cashless facilities. They are available in various categories: individual plans, family floater policies, employer-provided group insurance, critical illness coverage, senior citizen health insurance, etc.
On the other hand, life insurance provides financial support to the beneficiaries in case the policyholder passes away. Types include term life insurance, whole life insurance, and ULIP.
For both insurance plans, the premium amount will depend on common factors such as coverage amount, policyholder age, and underlying health conditions.
Balancing Your Budget for Health Insurance
Although health insurance is crucial in financial planning, it can be expensive. Here are some tips to save on your health insurance costs:
Assess Your Health Insurance Needs
Know how much coverage you would need by considering your medical history, the number of people in your family and current medical conditions. After assessing these factors, you can choose a coverage amount for your health insurance policy accordingly.
Compare Policies Using a Health Insurance Premium Calculator
A health insurance premium calculator helps estimate the premium based on parameters like age, sum insured, and add-ons. You can use this tool to compare plans and choose the cheapest plan available.
How to Use a Health Insurance Premium Calculator?
- Enter your age and medical history.
- Select the required sum insured.
- Add optional riders (if necessary).
- Compare premium amounts for different policies.
Consider a Family Floater Plan
A family floater plan can be cheaper than multiple individual plans in families with several members since a lump sum insured is split among all members.
Increase Your Deductibles
A higher deductible lowers your premium. Check if the deductible amount is feasible in case of a medical emergency.
Balancing Your Budget for Life Insurance
Following are some tips to balance your budget while purchasing life insurance:
Assess Your Life Insurance Needs
Determine the amount of financial support your dependents will need in your absence. This includes assessing their daily expenses, life goals, outstanding debt, and more. Based on these aspects, consider selecting the sum assured.
Choose an Affordable Term Insurance Policy
Here are some tips for choosing a cost-effective term insurance policy:
- Select a policy tenure consistent with financial responsibilities.
- Go for at least 10-15 times your annual income.
- Determine the cheapest rate by comparing policies offered by different insurers.
Opt for Riders Wisely
Riders may increase coverage, but it comes at a cost. Popular riders include:
- Critical illness cover
- Accidental death benefit
- Waiver of premium
Choose only those riders that add value to your current situation.
Review and Adjust Your Policy Periodically
The need for insurance coverage tends to increase with time. Thus, consider reviewing your policy annually and adjusting the coverage based on your financial situation.
Common Mistakes to Avoid When Balancing Health and Life Insurance Budget
Purchasing insurance while under budgeting can be tough. In this regard, the following are a few mistakes to avoid.
Underinsuring Yourself: Choosing coverage with a low premium can put you in a bad financial position.
Ignoring Policy Exclusions: To avoid surprises when making claims, always pay attention to what is excluded.
Not Reviewing Policies Periodically: Policies must be updated based on when your needs change over time.
Choosing the Cheapest Plan Without Checking Benefits: The commitment to low cost does not necessarily mean it provides the necessary coverage.
Strategies to Reduce Insurance Costs
Here are a few points to consider to reduce insurance costs:
- Opt for Higher Deductibles: Higher deductibles lead to lower premiums. The deductible is the amount you pay before the insurance coverage begins, and the insurer pays the rest.
- Maintain a Healthy Lifestyle:
Your health condition is major in determining your health and life insurance premiums. Adopting a healthy lifestyle, which includes regular exercise, a balanced diet, and not smoking, can lower costs.
- Buy Policies at a Younger Age: Treatment costs are cheaper when you are young as the risk to insurers is lower.
- Bundle Policies: Some insurance companies will even discount health and life insurance when you buy them simultaneously.
- Use No-Claim Bonuses: Many health insurance plans discount premiums for each claim-free year.
- Compare and Choose Wisely: Before choosing a policy, compare various insurance plans online.
Take Advantage of Tax Benefits
Both health insurance and life insurance policies offer tax benefits:
- Health Insurance: Premium payments are deductible under Section 80D of the Income Tax Act. Individuals can gain tax benefits up to ₹25,000, and senior citizens up to ₹50,000.
- Life Insurance: For paying term insurance policy premiums, taxpayers can avail deductions of up to ₹1.5 Lakh within a financial year under Section 80C.
Buying both health and life insurance policies is essential for financial security. However, following the tips mentioned above can be ideal to ensure that they do not upset your budget. Always use a health insurance premium calculator to find the best plan that balances premiums and coverage.
Also, consider a term plan when younger to get better premiums. Furthermore, for health and life insurance plans, always opt for a premium amount you can pay without straining your finances.
