6 Things That Influence Your Term Insurance Premium

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6 Things That Influence Your Term Insurance Premium (Image: Shutterstock)
6 Things That Influence Your Term Insurance Premium (Image: Shutterstock)

New Delhi : Since term life insurance plans are important assets for a person to have, new policyholders may want to invest in one to secure the future of their loved ones. In order to make an informed choice; one can use many of the online resources available for perusing. The resources and tools can be useful in determining what factors influence the premiums paid towards insurance plans such as a term insurance plan. Before we look at the things that effect the premium rates of a term insurance plan, let us tell you that you can use term life insurance calculators online to get an estimate. 

Term insurance is made effectively to cover the needs of the insured and their dependents through an assured benefit sum in the event of the policyholder's demise. 

The tax benefits of term insurance also state that the premiums paid for a term insurance plan and the payout sum thus received from the same at the time of maturity is exempted from taxation under Section 80C and 10(10D) of the Income Tax Act, 1961.

Premiums are a requisite that is recurrent in most life insurance and term plans in India, it is the nominal payment that is paid to the insurance provider by the policyholder on a regular basis throughout the policy tenure. This payment maintains the coverage provided by the insurance provider and adds to the payout that is assured to the beneficiary at the end of the policy term.

A term life insurance calculator is an online tool that helps a person to get an approximate quote as to the premium investment they would have to make for towards their term insurance on the basis of their income, age group, monetary liabilities. A term insurance calculator can also calculate the required amount of coverage a potential policyholder ought to avail according to the aforementioned metrics.

Today, the insurance market is replete with options for people across all economic statuses; the requisites for each are vastly different from one another. Different factors such as lifestyle, health conditions, age, and income determine the choice of a term insurance plan. A term life insurance calculator also uses these fields to calculate projected premiums for a plan. 

Now that you know what is term insurance, let us look at the things that influence your term insurance premium under a term life insurance plan:

1. Age: It is a misconception that one only requires term insurance when they are well past their younger years and only once they have dependents such as a spouse or children. A detriment of buying term plan insurance at an older age is the high cost of premiums, as a person is most likely to have illnesses or ailments at this age rather than at a young age. A term life insurance calculator also asks for the policyholder’s age while calculating the approximate premium, as it is an important factor for insurance providers. 

Buying a prolonged term insurance plan in one's mid-twenties is the ideal decision, as the cost of premiums is significantly less and one can alter their terms of coverage once they have major life developments such as a marriage or a child. 

2. Lifestyle Habits: The first step that a term life insurance calculator requires the potential policyholder to enter in order to calculate premiums is their apart from their Age, Gender, Annual Income is if they have tobacco dependency. 

These factors are essential in determining one’s approximate premium costs, if person hopes to have significantly affordable premiums they must choose to live their life in the healthiest way possible. Being a non-smoker, in their mid-twenties, or a relatively balanced lifestyle with little stress. 

3. Family Size: One of the first things a prospective policyholder should do, is determine their net expenses as an individual along with that of their family before choosing a coverage under any term insurance plan. A policyholder should opt for a term plan insurance that goes at least 8 times beyond their foreseeable family expenses, especially if they are the sole income earner. If a policyholder has a larger family which requires more coverage, their premium costs will also be higher. 

4. Chances of Hereditary Illnesses or Previous Illnesses: One of the factors insurance providers gauge is if the policyholder has any existing medical conditions, or if their family has a history of illness. Since illnesses require additional coverage, the premium costs for such policyholders will be higher. 

5. Gender: Insurance providers check the life-expectancy of the respective gender of the policyholder while choosing a plan. A term life insurance calculator also calculates the projected premiums on the basis of gender being one of the fields. Since women have a higher life-expectancy, they may have lower premium costs. 

6. Policy Tenure: The choice of tenure that one makes also influences the premium costs paid over the years.  A term insurance calculator also asks for this field as a calculating metric. It may be cost-effective to buy a shorter term plan with premiums, but once they complete their tenure, the age of the insured person increases which will increase the cost of premiums at the time of the renewal of the policy. 

A basic term insurance policy in India is considered to be one of the most affordable means of securing one's future where premiums are low and one can customise their coverage and payout methods as per their convenience.

The pursuit of identifying the ideal term life insurance plan in India can be completed by weighing one’s needs within tools like a term life insurance calculator. Purchasing a term insurance plan can be a daunting process, but with the correct tools and resources at hand, a person can avail the best of term plans and be secure about their future. 

Source: https://www.pwc.in/assets/pdfs/publications/2017/india-insurance-perspective.pdf