Factors Determining Term Insurance Premium

In today’s uncertain times, it has become extremely crucial to plan for the future and ensure protection right from the start. To get this protection, insurance products like life insurance, term insurance, and others have become extremely important. With a term insurance plan, you can ensure protection for your loved ones even in your absence and guarantee a secure future for them. So, if you too are planning to protect your family then start investing in term insurance plans. However, with so many term insurance plans available, it often becomes very difficult to pick the best-suited term insurance plan for yourself. So, in the section below, let’s discuss the different factors that affect the term insurance premium rate.

What is Term Insurance Premium Rate?

A term insurance plan is an agreement between the policyholder and the insurance company wherein the latter agrees to pay a specific amount in case the policyholder meets an unfortunate death. Thus, with term insurance plans, the nominees of policyholders can get financial protection. Now, to keep the term insurance plans active, policyholders need to pay a certain amount of money which is called the term insurance premium. The premium is basically the amount that the policyholder pays in order to receive the term insurance coverage during the policy term. The premium payment option can be of varied types such as the single pay option, limited pay option, and regular payment option. Now, there are different factors that affect the term insurance premium rates, which shall be discussed below.

Factors Affecting Term Insurance Premium Rates

Listed below are the different factors that affect the term insurance premium insurance rates:

• Age: One of the most important factors that affect the term insurance premium rate is the age of the policyholder. The age of the policyholder and the term insurance premium rate is directly proportional. For instance, if there is one individual whose age during buying the term insurance premium is 50 and another whose age is 30, so, in this case, the term insurance premium rate of the latter will be lower. This is because an individual who is older is at a higher risk of death, and thus it increases the risk for the insurer as well, thus resulting in a higher premium.

• Premium Payment Term: Another factor that affects the term insurance premium is the premium payment term. The premium payment term refers to the duration for which you pay the term insurance premium. There are basically three different types of premium payment terms such as regular payment term, limited option, and single pay option. It is best to choose the regular payment option, in which the policyholder agrees to pay the premium throughout the policy term. It is important to understand that the shorter the term insurance premium, the higher the term insurance premium.

• Gender: Sometimes, the gender of the policyholder also affects the term insurance premium rate. This is because it is found that women have a higher life expectancy rate, thus their term insurance premium is lower. As compared, the term insurance premium for males is found to be higher.

• Lifestyle Habits: Yet another important factor that affects the term insurance premium to a great extent is the lifestyle habits of the policyholder. Different lifestyle patterns such as smoking, and drinking, largely affect the term insurance premium. For instance, if the policyholder is found to be a smoker and drinker, then their term insurance premium will be higher. This is because such unhealthy lifestyle habits can lead to the early death of the policyholder. Moreover, within the lifestyle, if the individual is found to be involved in adventurous activities, then also the term insurance premium will be higher due to the risk involved in such activities.

• Medical Condition: Next, is the medical condition of the policyholder that affects the term insurance premium rates. For instance, if the policyholder has pre-existing diseases or other medical records, then the term insurance premium rate in such a case will be higher.

• Occupation: There are many policyholders who are involved in hazardous professions such as working in construction areas and others. Thus, for policyholders who are engaged in such professions, in such cases the term insurance premium will be higher.

• Types of term insurance plan chosen: Depending on the type of term insurance plan, the premium rate will accordingly vary. For instance, a joint-term insurance plan will have a higher premium. 

• Riders: You can also include a number of riders in your term insurance plan to further enhance its benefits. On adding riders to term insurance plans, the term insurance premium increases.

Take Away

Thus, you must keep the above-mentioned factors to understand how the term insurance premium rates vary. You can also get in touch with us at InsuranceDekho to know about the best term insurance plans.