7 Major Factors Which Affect Term Insurance Premiums

Written by : Knowledge Centre Team

2024-01-01

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Table of Content

0 1

Understanding a Term Plan

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Factors that Affect the Term Life Insura

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To Sum Up

A term policy is the purest, most basic life insurance, with the premium payment duration typically ranging between 10 to 30 years. You are required to pay a premium, and in case of your unfortunate demise during the insurance tenure, your family or chosen nominee receives a monetary benefit.

Age, gender, smoking behaviour, medical history, and overall health affect your premiums. By being aware of these factors, you can manage the cost of your premiums more effectively.

What are some key Factors that Affect Term Life Insurance Premiums?

The factors that affect the term life insurance rates are your age, gender, occupation, overall health, choice of plan, etc. Let us look at how these factors affect your premium.

Age: One of the critical elements in determining the term insurance premium price is the age of the insured. It is, in fact, the first and foremost factor that affects the term insurance premium. As you get old, your mortality rate increases and consequently your premium increases. It is, therefore, more economical in the long run to purchase term insurance early in life. The younger you are at the time of purchasing the policy, the lower premium you will pay.
Gender: Another factor that affects term life insurance premiums is gender. It is also connected to mortality because women live longer than males. As a result, if you're a woman, your term insurance premium will probably be less expensive than a man of the same age.
Lifestyle & Health: Your life expectancy and the cost of term insurance premiums are impacted by lifestyle choices, including drinking alcohol, smoking, and consuming other tobacco products. Therefore, leading a healthy lifestyle can result in less expensive insurance. Similarly, your premium is influenced by your health status and your family's medical history. Diabetes, for instance, is one of the most prevalent medical problems, and it can eventually cause a wide range of additional illnesses.Your term insurance premiums may increase if you have an existing health condition. However, if the condition is unstable, the insurer might still grant coverage after removing deaths brought on by the illness.
Occupation: Your living situation and health are defined by your occupation on many different levels. Some jobs are physically more demanding than others. Physically demanding jobs may affect life expectancy differently depending on the age group.
- Specialized or highly skilled jobs in Category 1 include jobs as a surgeon, teacher, driver, etc.
- Semi-skilled but without physical labour falls under Category 2. Most desk occupations are classified in this category only.
- Unskilled manual labour jobs in Category 3, such as mining and heavy manufacturing, have lower life insurance coverage premiums.
Residential Neighborhood: Rates of mortality may vary by region of residence. The cost of premiums in various regions might change if the difference is significant enough. Your term insurance premium will be higher if you live in a neighbourhood that frequently experiences earthquakes, floods, or tsunamis. So, the entire life cover premium directly reflects area prices.
Policy Term: When estimating the cost of premiums, the policy term is crucial. After the policy starts, the premium is applied regardless of age. The additional premiums from the following years will transfer to your current year the longer you want the coverage to last.
Add-on Benefits & Features of a Term Plan: Several additional advantages can be included with your term insurance policy, such as:

Benefits for Accidental Death: In the event of an accident or death, as a benefit of the base term insurance, the sum assured is provided to the nominee in the form of an accidental death benefit rider. The family can recoup these expenses thanks to additional money received as a claim benefit.
Benefits for Accidental Disability: The inclusion of this benefit in your term insurance plan is crucial. There are two ways to include this benefit in your policy: securing a premium waiver or paying a large amount of money in the event of a disability.
Cover Against Serious Illnesses: Heart diseases, cancer, and other illnesses have unpredictable onsets, progressions, and consequences. The cost of treating such critical diseases is likely to be extremely high. Therefore, having insurance that can offer financial support if one of these conditions is diagnosed can be beneficial.
Term Insurance with a Premium Refund: This plan will reimburse your premium payments if you outlive the policy term.

Also read: Benefits of Buying a Term Insurance Plan

To Sum Up

Life insurance has become an essential financial instrument that protects your family and dependents in your absence.

You can consider investing in policies like the Canara HSBC Life Insurance iSelect Smart360 Term Plan. It is a good choice for term insurance as it has a low premium rate and include a flexible premium payout option, comprehensive coverage, and an option for consumers to have their spouse as an additional beneficiary.

FAQs

The rule of term life insurance is that the policyholder pays a premium for a specific period of time, and if you pass away during the policy tenure, an assured sum is paid to your nominee. The premium payment is generally between 10 and 30 years.

The best amount of the term plan cover depends on your earnings. It is recommended for your term insurance coverage to be at least 10 to 12 times your yearly income. It is projected that this amount can be adequate to meet impending needs and survive inflation rates if spent judiciously.

There are various components of a term plan policy premium, such as:

Amount Insured.
Maturity Amount.
Risks Involved.
Type of Policy.
Due Date of Payment of Premium.
Amount to be received in case of Policy maturing early, i.e., before the date of maturity.