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As you all know, a life insurance plan is a long-term commitment that extends over decades and you are required to make consistent payments of your hard-earned money in the form of premiums. The term insurance premium quotes vary from insurance company to insurance company and also differ as per your age, health and lifestyle practices. Therefore, before buying term insurance, it is very important to understand the factors that could affect your term insurance premium. Let’s understand this in detail:
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Now that we have discussed what is term insurance, let’s understand what are the factors affecting insurance premiums. Here is a list of the 7 factors affecting term insurance premium are:
Age
Gender
Premium Payment Term
Lifestyle Habits
Medical Conditions
Occupation
Adding Riders
Age is one of the important factors that affects the life insurance premium quotes is your age. When you are younger, you are normally healthier which means the insurer sees you as less risky to insure. As you get older, the probability of health issues increase, and even common conditions such as asthma or diabetes can make your term insurance costly. So, it is a good idea to buy term insurance when you are young.
Another significant factor to consider is your gender. Typically, women have a longer life expectancy than men, which often results in insurers charging them lower premiums. According to a 2022, Report of Economic Survey, women tend to live longer. This simply means that a woman might pay premiums for a more extended period in comparison to a man, contributing to the lower premium costs.
The premium payment term of a term life insurance plan is the time during which you have to pay the premiums for your life or term insurance plan. You can select from below options:
Regular premium payment: Pay the premium for the whole term of the policy.
Limited premium payment: Pay the premium for a specified period of time only while continuing to enjoy the benefits of policy that extends beyond that period.
Single premium payment: Pay the entire premium amount in a single go as a lump sum payment.
So, based on the premium payment term you select, the calculation of your premium for your life insurance plan varies. Single or limited payment plans have higher premiums than regular premium payment options.
Lifestyle practices like smoking, alcohol consumption and participating in adventurous activities (surfing, paragliding, etc.) are the exclusions for the insurer. For example: If Raghy is 30 years old, smokes and drinks alcohol. His friend Rajiv is 35 years old and does not drink alcohol or smoke tobacco. What do you think, who will have to pay a comparatively less amount of premium? Regardless of his age, Rajiv will have to pay a higher premium than Raghu because his smoking and drinking habits may lead to medical issues and sometimes early demise.
Most insurance policies require you to undergo a medical test before buying term insurance plan. These health tests will provide your complete health status to the insurer, including the current illnesses you suffer from. Medical records will be used to determine the term insurance premium required to be paid for a specific life cover. If in case you are diagnosed or are suffering from certain diseases, they may cause an increase in premium as compared to a healthy person.
For example: Ashu and Anaya buy term insurance plans. Anshu has diabetes, whereas Anaya doesn't have any pre-existing illnesses. So, the premium amounts of Ashu’s plan will be higher than Anaya.
Although it is considered as one of the least common factors, it can have an impact on term insurance quotes. People who are working in a hazardous environment have been the cause of high-stress levels, will generally have higher premium costs as compared to people working in low-stress jobs.
Adding riders to your base term plan can increase the premium because riders provide additional benefits or coverage, such as critical illness or accidental death, increasing the insurer's potential liability. These added features come at an extra cost, leading to a higher premium. However, they enhance the overall protection and customization of the policy, tailoring it to specific needs, making the additional cost worthwhile for those seeking comprehensive coverage. The final premium amount depends on the types and extent of riders chosen.
*Note: You can use term insurance calculator to very easily calculate your term insurance premium amount of your term plan.
Term Plans
Term plan premiums differ for different people and circumstances, as discussed above. Now, let’s discuss the different ways to reduce term insurance premium:
Premiums of term insurance plans increase with age. Therefore, you can save a lot of money by purchasing a term insurance plan at an early age and helping your dependents with financial protection in the long run.
If you choose a short policy tenure, the term plan premium increases. So, selecting a longer policy term will help lessen the financial stress of the premium payable annually.
You can enhance the coverage of a life insurance plan with extra benefits by adding riders with the base plan. These term insurance riders are opted for at an extra premium. The selection of the right rider as per your requirement can help lower the rates of premium.
Comparison between different term life insurance policies while selecting the right term plan helps you in making an informed decision. Consider different parameters such as benefits, premium, company’s trust while comparing plans.
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Understanding the above mentioned factors affecting term insurance premiums in India is crucial for making informed decisions that eventually ensure the financial security of your family. Therefore, make sure you analyze all the factors before buying term plan.
Note: Check out the best term insurance plan in India and choose one that suits your requirements.
†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
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