Life insurance cost in India 2024: How middle class families can afford coverage

Life Insurance
Insurers are now designing more modest products catering to diverse groups. Photo: Special Arrangement/Acko.

Financial security is vital for every family, yet many struggle to afford adequate coverage. As costs of living rise, could innovative solutions make life insurance more accessible? This topic explores trends in the Indian insurance market and emerging strategies to bridge the protection gap for middle-income households. With thoughtful planning and pragmatic reforms, financial security can be within reach.

How Life Insurance Works
In simple terms, life insurance provides financial support to your family if you pass away during the policy period. You pay regular premiums, and in return, your nominees receive a lump sum payout (the assured amount) in the unfortunate event of your death. This money can help cover major expenses like children's education, loans, house bills, etc.

Why Are Premiums Going Up?
There are a few key reasons why people are paying more for policies:

  • More lifestyle diseases: With more diabetes, heart problems, etc., people are living shorter lives, and insurance companies are covering this risk by increasing premiums.

  • Buying policies later in life: People buy policies at older ages instead of getting insured early on. Naturally, rates are higher for older people due to increased risks.

  • Rising inflation: As the Cost of living has shot up, people buy bigger covers to get the same level of protection, and companies charge more for larger assured amounts.

  • Stricter regulations: New rules ensure firms have enough money to pay claims, leading them to raise premiums

Difficulties Faced by Middle-Income Groups in Buying Adequate Life Insurance
Most middle-class Indian households find it challenging to afford comprehensive life insurance owing to the following:

  • Limited disposable incomes make decent covers unviable—When basic necessities consume most earnings, large recurring expenses like premiums become unaffordable.

  • A lack of knowledge about insurance products best suited to income levels and family situations can lead to imperfect choices.

  • The misconception that buying insurance is complicated, leading to procrastination - Assumptions of excessive paperwork and lengthy medical checks put off buyers

How Middle-Class Families Can Afford Coverage
Middle-class families can afford insurance coverage by adopting several strategies:

  • Start as early as possible, ideally in one's 20s or 30s. This ensures the lowest rates throughout the cover duration.

  • Carefully assess how much coverage is adequate rather than opting for very high sums assured out of fear or pressure—this prevents overspending.

  • Term insurance can be an ideal option for pure risk protection. This straightforward life insurance is known for its affordability.

  • Do thorough research and compare quotes across insurers. This helps spot good value offerings at reasonable premiums.

  • For married couples, consider a joint life policy. It is often cheaper than buying two separate individual policies.

Ways to Manage Premium Costs

Here are some innovative ways to save on premium outgo:

1. Extend the policy tenure: Opting for longer terms spreads expenses over many years, cutting annual outgo. Check premium rates for different tenure options.

2. Pay premiums annually instead of monthly: Skipping instalment plans avoids the hefty processing fees.

3. Consider buying online to save commissions: Direct online purchases reduce agent fees and paperwork costs.

The Bottom Line
Life insurance costs seem daunting for middle-class families in India. However, adequate protection at affordable premiums is possible with early enrollment, diligent research, and wise coverage selection. Above all, insurers are now designing more modest products catering to diverse groups. This approach ensures that policies remain accessible and affordable to middle-class families.  

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