How is your Term Insurance Premium Calculated?

Have you ever wondered why your insurance provider quoted a higher premium price while you were trying to renew your term life insurance plan?

Well, before you begin to blame inflation, understand that it might just be you, not them. Age is one of the most determining factors when it comes to term insurance premiums. You have aged from the last time you bought insurance and that could reflect in the premium quoted as well.

Your term life insurance’s premium is influenced by a lot of factors, all trying to measure the risk involved. As far as insurance companies are concerned, risk means the chances of your insurance policy being claimed. Hence, more the risk, more the premium.

Let’s look at some of the factors that could influence your premium for term insurance plans in India.

  1. Age – As said above, your age is an important factor that influences your premium price. Insurance companies see that if you are at a very young age, the chances of something unfortunate happening to you is comparatively lesser than someone in their middle ages. Hence, the risk of your insurance being claimed is less, meaning lesser premium.
  2. Gender –World Health Organisation’s health statistics data for 2021 showed that Indian women’s life expectancy was 2.7 years higher than men. This means that there is a slightly higher risk involved in life insurance for men. Hence, life insurance premiums tend to be a little lesser if you are a woman.
  3. Profession – Your profession and the risk involved with it also play an important role in determining your term insurance price. Suppose if you are working in a risky environment, such as in a mine or operating a heavy machinery, your premium could be higher. Desk jobs such as teaching are considered to be less risky, attracting lesser premiums for term life insurance.
  4. Location – If you live in a location that is prone to natural disasters, insurance companies assume more risk in your policy and hence, the premium could be higher. Geopolitical situations could also affect the risk. If you are living in a place that has a geopolitical crisis, your premium could be higher.
  5. BMI – Your height and weight is used to determine your health status and it plays a role in determining the risk involved. For example, if your BMI is between 18.5 and 24.9, you are considered to have the optimal weight in accordance with your height. This means your insurance price will be lesser.
  6. Medical history – Yours, as well as your family’s medical history, is directly related to risk. If you have a history of a serious illness or if your family has a history of hereditary illnesses, like heart ailments, the risk related to your plan could be considered higher. This could increase your term insurance’s premium.
  7. Lifestyle – Your lifestyle choices have a role in determining how your health will be in the future. If you are a smoker and if you consume alcohol, you will be considered as someone who might develop a serious illness in future. This could make insurance companies charge a higher premium from you.
  8. Numbers – Certain numbers pertaining to your insurance policy, like the period of time you want to be insured and the number of dependents you want to add to your plan, also affect your premium.

How to calculate term insurance premium?

Term insurance premium calculators that are available online will help you in calculating your insurance prices. Term insurance plans in India are priced according to the factors mentioned above. These calculators will take in all these factors and will show you a premium and a plan that could work for you. The resources available in different insurance providers’ websites will help you do your research and understand term insurance benefits as well.

An important thing to understand here is that providing the correct information is vital for successful insurance claims. If you provide false information for a decreased insurance price, your insurance company can reject your family member’s claim, if something is to happen to you. Hence, it is always advisable to double-check all the vital information and beneficiary details.