How is Term Insurance Premium Calculated?

Term insurance premium is the thing that comes into the picture first when you decide to buy a term insurance policy. The premium amount must be calculated effectively; else it will affect your overall budget and future financial planning. Nowadays, term insurance calculators are readily available on the aggregators or insurance companies’ websites, and you can get the quote for your plan in just a few clicks. However, most of the times, we don’t have a clue how insurance companies calculate term insurance premiums. In this article, shall put the focus on a few factors on which term insurance premium is calculated.

Following are the factors that decide what your term insurance will be.

Your Age

The quote for your plan is decided depending on your age. Considering general life expectancy and the risk of falling prey to any uncertain event, the amount is calculated. It is observed that people in the early stages of their life have less risk, whereas as the age increases, the risk also increases. Ultimately, the premium amount is raised along with your age.

The Sum Assured You Choose

Term insurance premium also depends on the life cover you choose for your plan. Higher the sum assured maximum the premium. Thus, never select abundant cover if you want to save on the premiums. Remember, appropriate sum assured means ideal premiums.

Tenure of the Policy

The tenure of the policy depends on different scenarios. If your policy term extends to the retirement, the premiums will be higher as your regular income will be stopped, and you may be exposed to several diseases due to the age. However, if the maturity date is within early stages of your life, the premiums will be lower.

Your Health Conditions

Term insurance premiums are lower if any medical history is not found at the time of purchasing the policy. If spotted with the past medical cases or any critical disease such as Alzheimer’s Disease or Cancer or any other, the term insurance premiums increase as you are more exposed to the uncertainty. It is due to the possibility of claim is more.

Your Lifestyle

When the term insurance premiums are calculated, your lifestyle also matters! If you possess any dangerous habit of smoking, drinking alcohol, or inhaling drugs, you are more likely to fall prey to several diseases. This may also increase the premium amount by 30% to 70% than the regular ones. Sometimes, the insurer may deny selling the policy if you’re habits are extreme.

Based on these factors, the insurance company decides what premium will be ideal for your policy. While using term plan calculator, you will be asked to provide all these details to the company.

How is Term Insurance Premium Calculated?

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