Taking Cover. Simple tips to save on premiums

Insurance is the single most important instrument for financial protection, and paying premiums regularly to keep your policy going is an absolute necessity. However, there are some simple disclosures and suggestions you can consider to lower your premium, without compromising on the protection.

Your vehicle insurance premium typically considers your claims history and offers discounts such as no-claim bonus. Additionally, if you are a member of Automobile Association of India, disclosing this can result in discounts. Also, installing anti-theft devices helps protect the vehicle from theft and reduces your insurance payment.

Vehicle owners who don’t have a driving licence may be able to get lower rates, says Puneet Sahni, Head - Product Development, SBI General Insurance Company. The premium will be lower as there is no personal accident cover to the owner/driver.

There may be other gadgets you can install. Bajaj Allianz General Insurance has a telematics device called Drive Smart that collects real-time data on driving behaviour, which can be used to incentivise good driving behaviour. The device is free and customers can opt for this service when buying or renewing their policy. Discounts will be offered after data is collected over a 12-month period.

Compared to other types of insurance where premiums tend to be standard, health insurance premiums vary based on the insured’s specific conditions. Age, habits and health conditions can push up premiums. For example, a non-smoker pays lower premium than those with smoking habits. Keeping a check on blood pressure or sugar levels could also help. Mohit Rochlani, Director IT and Operations, IndiaFirst Life Insurance, says that people purchase multiple policies instead of checking if a single policy can be leveraged using top-ups. Thus, top-up covers can be used to obtain a higher cover while shelling out lower for premiums. Opting for health check-up could also reduce costs, especially when the coverage amount is large.

For life insurance, the premium amount is based on the perceived risk of death and the risk is considered lower at a younger age. Shalabh Saxena, Chief Operating Officer, Canara HSBC Oriental Bank of Commerce Life Insurance Company suggests buying an insurance product early in your life to cover your entire working life, which would help you pay a lower premium. Secondly, the kind of policy you pick also matters.

A term insurance plan, for instance, is more cost-effective than traditional plans. It does not mix insurance and investment and serves to cover one's existing and future financial liabilities; it will also protect the standard of living of the family in case of any eventuality. Women have a better mortality experience and most companies offer a better rate to women at a given age, all else remaining the same, says Rochlani. Finally, insurers give discounts for one-time or annual payment versus monthly or quarterly premium collection. Also, costs are lower for online payment than for the traditional modes.

In the case of property insurance, providing full disclosure of safety and maintenance, along with details on the fire-fighting equipment can lead to reduction in price, says Sahni. In case of protecting an outstanding loan amount against a house or vehicle, it is best to take a reducing cover credit life plan that reflects the outstanding amount and hence has more efficient premiums, advises Rochlani.

Buying online is typically cheaper than using offline methods. You can search for options online on the insurer's or web aggregator's website to find the best cover and the lowest price.

In general, insurance is a complex financial product with, often, innovative add-on covers. You must evaluate the need for these covers as they may add to cost without offering much benefit. Saxena advises consulting your financial advisor, doing a thorough need analysis and then buying to ensure product relevance, longevity and hence better utilisation of money.

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