Factors that Decide Your Term Insurance Premium

Companies selling term insurance policies take into account various factors to arrive at a premium for your policy. Some of these factors are within your control while others are not. By controlling the factors that are within your ability to influence, you become risk-free investment for an insurance company. Hence, your term insurance premium is lowered.

Let’s discuss the factors that that affect your term insurance premium:

Drinking in excess and/or smoking tobacco

Needless to say both smoking and drinking are bad for health and increase your mortality risk. Exactly the reason why insurance companies ask about these habits before fixing the premium for your policy. If you smoke, you would pay much more premium for a term insurance policy than if you were a non-smoker. Also, if you drink too much the insurer will charge more to insure you.

Your occupation

If the type of job you do is a risky one such as deep sea diving, firefighting, bomb demolition etc. then your insurance premium is likely to be much higher than if you work is a regular office job.

Your health

Your state of health is a major factor determining your mortality risk and therefore your term insurance premium. Further, majority of insurers insist that the policy applicant get a medical examination/test done in cases where the applicant's age is above a certain limit. Some may require this even for young applicants. Medical examination would also be required if a very high cover is asked for irrespective of the age of the policy applicant.

Riders increase premium

Riders are additional benefits on policies which can be bought for extra premium. Obviously these increase the policy cost. Therefore, carefully evaluate the need for a rider before deciding to buy it.

Purchasing online or offline

Premium charged for policies bought online tends to be less than what you would pay for the same policy bought offline via an agent or other intermediary. This is because online sales help insurance companies cut down on agent commissions, distribution and administrative costs. Purchasing online or offline depends on how much of customized advice you need in choosing a suitable policy.

Below are the factors that affect your Term insurance premium but are beyond your control:

Your age

The older you are when you buy a term insurance policy the higher the premium. This is because the chance of dying or mortality risk increases with age. By and large, younger people are healthier but the probability of their health deteriorating increases as they get older. This is why your age is one of the first questions asked by an insurance company when calculating your premium.

Your gender

This also one of the main determinants of your policy premium. As per statistical studies women generally tend to live longer than men. This obviously impacts the female gender's age-related mortality risk. Therefore, other things being equal, a woman is likely to be charged lower premium than a man of the same age for the same policy.

Genetic factors

Being genetically susceptible to certain diseases such as diabetes, heart problems etc. is also likely to increase your term insurance premium. Insurers ask questions about your family's medical history in order to see if any hereditary factors exist.

How much each factor affects your premium depends on the rating and underwriting method of each insurance company. Therefore it is always advisable to compare premium quotes on an online broking site. However, you should also compare the companies on parameters such as policy coverage, reputation, customer service record, claims settlement ratio etc. and not base your decision on premium rate alone.

I am an expert writer in Insurance Industry and have knowledge about various insurances online like Car Insurance, Two-wheeler Insurance, Health Insurance.