What are the Factors That Affect Term Insurance Premium

Having a family’s support through the ups and downs of life may be considered a priceless gift. You may aspire to secure the life of your loved ones in your absence, and a term plan may help you accomplish it. When you buy a term insurance plan, you may get a life cover for a fixed tenure as selected by you during the purchase of your plan. If you were to lose your life within the duration of the plan, your nominee will receive death benefits subject to plan’s terms & conditions. The death benefit may allow your family to live a financially secure life even in your absence. In order to receive the benefit under the plan, you need to pay a consideration to the insurer in the form of premium.

There are several factors that may have an impact on the premium amount you need to pay to the insurer for the chosen life cover. Let’s take a look.

1. Age

The age is a critical factor affecting term insurance premiums. Simply put, the older the policyholder, the higher the premium may be^[1]. This is because old people are more prone to health complications, which, in turn, poses a higher risk to the insurer. Life insurance companies may use age as a determining factor for premium calculation, because younger individuals may be less likely to fall ill from age-related lifestyle diseases or pass away prematurely.

Therefore, if you are in good health and young, it may be wise to consider purchasing term insurance now to avoid a potential increase in premiums later.

2. Health Condition

Your health may directly affect your longevity and quality of life. Hence, it may be one of the factors affecting term insurance premiums. Medical tests may help in providing a complete status of your health to the insurance provider. Diagnosis of any chronic health condition may lead to a rise in your premium amount or even rejection of your policy.

Along with your health condition, your insurance provider may also ask about your family’s medical history. Knowing your family’s history may allow the insurance providers to be aware of any risk factors affecting your health in future.

3. Gender

When using an online term insurance premium calculator, you may be asked to specify your gender, as a part of the premium estimation process. Your gender may also be one of the factors affecting term insurance premiums.

Women may have a longer average life expectancy than men in India ^[2]. This means that women may hold their term insurance policies for a more extended period, which may impact their premiums in the policy.

4. Smoking Habits

Smoking is a habit that may severely affect your health. Smokers usually may be more likely to develop lung cancer and heart disease than non-smokers. The risk factors associated with smoking may be reflected in the increase in term insurance premiums for smokers. If you are a former smoker, you may inquire with your insurance provider whether your current lifestyle prevents an increase in your term insurance premium.

5. Occupation

Although it may be overlooked, occupation may be one of the factors affecting term insurance premiums. Certain professions, such as construction workers or pilots, may involve regular exposure to life-threatening tasks, which may increase the risk of loss of life.

When individuals in these professions apply for life insurance, it may have an impact on the premiums they have to pay. How much increase premiums undergo due to occupation, may depend on the insurance provider involved.

6. Lifestyle Habits

The way you live your life may be a consideration when a life insurance company is determining your premium. For example, if you consume alcohol regularly, your quality of life may be affected and in turn, your premium. Insurers may take note of these habits when assessing the risk factor associated with a policy buyer.

On the other hand, if you do not have any alcohol or smoking habits, you may be maintaining a healthy lifestyle and may be able to prevent an increase in term insurance premiums.

7. Tenure of your plan

The duration for which you take a life cover may directly affect your term insurance premium. You may want to ensure to choose a tenure offering sufficient coverage to cover your dependents and liabilities.

A term plan may ensure you get the sufficient coverage you need at an affordable premium. The above factors affecting term insurance premiums may help you understand how life insurance providers calculate your premiums. You may also want to use a life insurance calculator to get an estimate of your coverage needs.

References –

^[1] https://www.bajajallianzlife.com/life-insurance-guide/life/factors-that-increase-life-insurance-premium.html

^[2]https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8638908/

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