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Factors That Influence Your Premium Amount

  8/11/18 9:42 AM

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Term insurance plan provides protection against any financial loss resulting due to the death of the insured. This protection is provided in the form of a sum assured amount which is also known as a life-cover. Once you select the required life-cover, you have to pay a premium amount for it.

Term insurance premiums are based on a number of factors. It may be difficult to understand why and what are the associated charges, and why premium rates differ. There are some common factors that many life insurance companies consider when pricing their policies. The life choices you make, can also lead to the factors that can affect your life Insurance premium.

Below are the factors that affect your life insurance premium:

  1. Age: Your age while purchasing a term plan is an obvious factor that affects your premium. If you’re young the rates will be lower in comparison to someone older. This is because the possibility of a young person contracting a life threatening disease and passing away in their youth is unlikely. Hence, the risk associated is fairly low.
     
  2. Smoking: Smoking puts the policyholders at higher risk of all ailments, so if you’re a smoker that that’s as good as raising a red flag to life insurance companies. Most smokers pay a premium twice as much as non – smoker, thus affecting the premium rate to a huge extent.
     
  3. Gender: As per statistical findings, women are believed to approximately live 5 years more than men. Therefore affecting the premium they pay, making them pay the premium at lower rate. Hence, there’s a discounted rate for women.
     
  4. Medical history: If a policyholder’s has a medical history of serious illnesses like cancer, heart diseases, or any other hereditary diseases. This increases the premium rate.
     
  5. Health records: You will also need to undergo medical tests. These records will ensure that you don’t have any chronic diseases or potential health issues and keep your premium also in check.
     
  6. Drinking: Just like smoking drinking alcohol is injurious to health. If you are a heavy consumer of alcohol this can increase your premium rates. Life insurance companies ask the applicant if they are smokers or drinkers.
     
  7. Policy tenure and sum-assured: These are obvious factors that will affect your life insurance premiums. A large sum assured at a shorter tenure will be fairly expensive
     
  8. Profession and lifestyle choices: Your profession also plays an important role in the premium you end up paying. If you are working in the mining industry, oil and gas, fisheries or any other hazardous profession, it increases the premium you pay. If you are highly adventurous and like speeding cars, climbing treacherous mountains or other high risk activities then this may increase your premium to a certain extent depending on the underwriter

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