What Are The Factors That Increase Or Decrease Your Premium Calculation?

Online premium calculator which is available at every life insurance company’s official website, helps a potential buyer to estimate the amount of premiums which he/she will be paying for the life insurance policy, before even actually purchasing a life insurance policy. People often calculate premiums before purchasing a life insurance policy, because premium calculators make comparisons easy. Premium calculators are very convenient and easy to use, within minutes you calculate the premium of the life insurance policy by entering simple details. There are certain factors which affect the premium calculation, these factors may increase or decrease the premium for your life insurance policy.

What Are The Factors That Increase Or Decrease Your Premium Calculation?

Below mentioned are some factors which can increase or decrease the premium for your life insurance policy:

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1. Age: Age plays a major role in premium calculation for a life insurance policy. It is always advised to purchase a life insurance policy at a young age, because elderly people are more prone to diseases as compared to young people. Premium of a life insurance policy increases as the age increases.
   Insurance Requirements: The need of purchasing a life insurance policy can affect the premium calculation. A potential buyer can opt for a high sum assured/coverage amount to provide enough financial resources which can help the family in difficult times, leading to an automatic increase in the premium amount. A potential buyer can also require additional coverage such as critical illness cover or accidental death cover which come in exchange for an additional premium.
2. Gender: Usually many life insurance companies offer different premiums for women. According to studies, and many scientific facts state that women need more medical attention as compared to men, leading to life insurance company’s charging a high premium rate for women.
3. Body Mass Index: Body Mass Index is referred to as an indicator of fat in one’s body. If a person has a high BMI, the premium for the life insurance policy will be high because people with high BMI are considered prone to illnesses such as obesity, diabetes, high blood pressure, heart diseases etc.
4. Pre-existing Medical Conditions: Generally people who have pre-existing medical conditions are charged with high premiums because they require extra coverage for the medical condition they have.
5. Lifestyle: Your living standard can affect the premium of a life insurance policy. Current lifestyle of a potential buyer has to affect the premium calculation for a life insurance policy. Financial liabilities, expenses, number of financial dependents, annual income, hobbies etc. affect the premiums for a life insurance policy. If you like to participate in adventurous activities, like mountaineering, skydiving, sea diving, motor racing etc. premiums charged by the insurance company may be high.
6. Current Health Status: Your current health status definitely matters while calculating premium for a life insurance policy. Before you purchase a life insurance policy, the insurance company may ask you to undergo a certain medical examination to evaluate the risk. In case you are diagnosed with a disease or terminal illness, the premium will increase as you require extra coverage.
7. Personal Habits: Personal habits like consumption of alcohol/tobacco plays an important role while premium calculation of a life insurance policy. Usually life insurance companies charge high premiums for people who consume tobacco/alcohol on a regular basis, because these people are considered with high risk involved as they are prone to health problems.
8. Occupation: Your occupation and the amount of risk involved that you are exposed to while working can affect the premiums of your life insurance policy. If you work in a less risky environment the premiums of your life insurance policy will be affordable but if you are in a risky environment such as transport, mines, construction sites etc. then the premiums charged for your life insurance policy will be higher.
9. Policy Term: Coverage period of your life insurance policy also known as policy term can affect the premium. If you choose to go for a long coverage period the premiums charged shall be higher than that of a short term life insurance policy.

To Conclude

Above mentioned aspects can help you understand how the premiums of your life insurance policy can decrease or increase. It is advised to carefully provide the above mentioned details to avoid any discrepancies at the time of claim or policy issuance.

Also Read: How to Select the Right Term Insurance Policy?

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.