Do Term Insurance Premiums Increase?
Life is unpredictable and fragile. You never know when something unexpected may throw all your plans out of order. Amidst such uncertainty, term plans offer some level of financial security to you and your family. The importance of term insurance has only been strengthened by the onset of the coronavirus pandemic. Incidentally, the rise in reinsurance costs appears to be affecting the premiums charged for offline and online term plans.
So, do term insurance premiums increase because of the pandemic? Let us get into the details and find out.
How is COVID-19 affecting term insurance premiums this year?
The COVID-19 pandemic is an event that has resulted in major claims. With many people who were unfortunate enough to contract the virus meeting their demise, life insurance companies may be seeing a higher level of claims than the regular average. To safeguard themselves against uncertainties in their day-to-day business and to seek protection against major claim events, insurers rely on reinsurance, which is insurance that insurance companies purchase from reinsurance companies. Reinsurance protects insurers from uncertainties in their everyday business, and particularly during events like this pandemic, which can result in major claims. With reinsurance, companies pass on some part of their own insurance liabilities to other reinsurance companies.
Do term insurance premiums increase this year?
So, given the rising costs of reinsurance, do term insurance premiums increase this year? It turns out that that may be the case. According to recent news pertaining to term insurance, the overall premiums charged for life insurance plans is likely to increase by around 20% to 40% during the year 2020.  Several insurance companies have already increased their premium rates.
This rise in premium costs for the end user may arise because reinsurers are likely to increase their premiums by up to 40%, owing to the rising mortality rates in the country. 
Factors affecting term insurance premium
Now that you have seen why there is a potential for increase in premiums, you are perhaps wondering about the other factors that can affect the amount charged for term insurance. A closer look shows us that there are two types of factors that can affect policy premiums – controllable and uncontrollable. You will find that many term insurance calculators ask you to enter some of these details.
1. Controllable factors
• Lifestyle habits
Certain lifestyle-related habits like smoking and drinking alcohol impact the premiums you are charged. Smokers, for instance, are charged a higher premium than non-smokers are because the former has an increased risk of mortality.
Not all jobs come with the same level of risk. Some like firefighting, deep-sea diving, and mining pose a higher occupational risk than others do like teaching or counselling. Premiums are higher for people in risky jobs.
Your medical condition affects your premiums too. If you suffer from illnesses like diabetes or heart ailments, you may attract a higher premium rate due to increased risk of mortality.
• Duration of the policy
You can choose from policies that offer coverage for a fixed term, like 20 years or more, and policies that offer whole life coverage. The longer your policy duration is, the higher the premium can be, because it means a more prolonged responsibility for the insurance company. One needs to evaluate their risk appetite and needs before deciding on their life cover.
• Value of the policy
The amount of life cover you seek also impacts the premiums you pay. The higher the sum assured, the greater the premium.
• Mode of purchase
You can purchase offline or online term plans. Online term insurance premiums are generally lower when compared with offline premiums, because of the sales channel.
2. Uncontrollable factors
Age is a key factor in determining the rate of premiums you will pay. The younger you are, the lower the premium you are charged, because the risk of you falling sick or passing away is much lower.
Scientific research suggests that women tend to live longer than men do. Therefore, insurance companies charge a higher premium for men than women.
Why buy term insurance now?
Even though some insurers appear to have passed on the burden of rising reinsurance costs to the end user, not all life insurance companies have done so. Some insurers have only partially passed on the burden to their policyholders. Then again, some life insurance companies are still evaluating the situation.
However, it is possible that all insurers will eventually set higher premiums for their insurance policies by the end of this year. So, it is a smart financial decision to buy offline or online term plans as early as you can, before the burden of higher costs is inevitably passed on to policyholders. Therefore, the time is ripe to take advantage of affordable premiums, before the forecasted premium hike occurs.
Additionally, since term plans charge premium at a constant rate, you will not be required to pay a higher rate of premium later if you purchase your plan now. Overall, the earlier you buy a term insurance plan, the better your chances of dodging the premium hikes.
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