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8 Factors That Determine Your Life Insurance Premium

Published On Jul 02, 2021

The payable premium is the amount paid by the policyholder to ensure the continuity and validity of the life insurance policy contract. Different insurance providers have their own distinct criteria to decide the premium amount. Moreover, the value of the premium payment is also determined after assessing the policyholder's personal needs and professional goals. Read on to find out 8 factors that determine the payable premium on your life insurance policy.

8 Factors That Determine Your Life Insurance Premium

Here is the list of 8 common factors that decide your life insurance premium amount. 

1. Age

The age of the life assured plays a primary role in determining the premium rates. It has been noted that a young and healthy life assured will be at a lower risk of contracting an illness than an older life assured. Moreover, the former will buy a life insurance policy for a longer duration due to his/her young age which equals the more payable premium instalments.  Thus, it is advisable to purchase a life insurance policy as soon as you start earning stable income to get higher coverage at lower premium prices. 

2. Gender

Many insurance policy providers offer lesser premium rates to women than the men of the same age as it is believed that women tend to live longer than men. Hence, the risk claim is lower in the case of a female life assured than the male life assured. 

3. Occupation

Higher premium prices are charged on policyholders with a dangerous work environment and occupation like miners, shipping, fishermen, industry workers etc than people with white-collar jobs and relatively safer careers.

4. Health Status

This is another factor that determines the rate of premium on the life insurance policy. If the life assured has a pre-existing illness or has a family history of the disease, the insurance provider might charge higher premium rates. 

5. Lifestyle

Smoking and drinking increase the risk of contracting critical diseases like cancer, heart ailments, liver conditions etc. That is why insurance providers offer higher premium rates to the life assured with smoking and drinking problems than the one who has a healthy lifestyle. 

6. Policy Term

A longer duration of a life insurance policy generally leads to lower premium rates. Thus, it is advisable to opt for long term insurance policies rather than short-term plans. 

7. Premium Payment Frequency

Various options like a lump sum, monthly, quarterly, half-yearly or annual premium payment frequencies are available to the life assured. You can choose the frequency according to your financial needs and budget. However, it must be noted that payment made in a lump sum or annual method offers lower premium prices than monthly payment frequency. 

8. Online or Offline Mode

The administration and service costs of consultation and assistance incurred by the insurer on life insurance policies bought online are negligible compared to the offline mode, where substantial charges are incurred on paperwork and commissions as well. Hence, the costs saved in an online way are incorporated as bonuses and offered back to the life assured when lowers the premium price.

Take Away

The rate of influence the factors mentioned above have on your life insurance policy premium also depends on the insurance providers and their scale of measuring the risk involved with each factor. Hence, it is advisable to compare all the policies provided by different insurers to make a more informed decision.

Also Read: 

Comparison: Life Insurance vs Term Insurance

What If I Don’t Renew My Life Insurance Plan?

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. 

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