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Factors that Determine Your Life Insurance Premium

Published On Apr 01, 2021, Updated On Apr 26, 2021

There are some factors that many insurance companies consider when pricing premium, which may not be within your control. However, the life choices you make, can also lead to factors that can affect your life insurance premium. The factors that determine life insurance premium are

Factors that Determine Your Life Insurance Premium

Following are fators that determine your life insurance premium:

1. Age

This is the first factor that insurance companies consider while deciding the premium. Young people have a low risk of getting any critical illnesses or life-threatening diseases when compared with older people. Therefore, the premium amount will be low for young people and high for elderly people.

Also Read:- Life Insurance Terminologies Every Insured Must Know

2. Family Medical History

It plays a critical role in determining the premium. If there has been a history of illnesses in the family there are chances that the insured can contract such diseases due to heredity. Hence, life insurance companies will charge a higher premium.

3. Smoking and Drinking Habit

Smoking and drinking puts the policyholders at higher risk of critical ailments; so, if you are a smoker/heavy consumer of alcohol, this can affect your premium to a great extent. Most smokers/alcohol consumers pay a premium twice as much as a teetotaller does. 

4. Profession

Your profession plays an important role in the premium. Policy holders working in professions such as mining industry, shipping, piloting, fisheries, oil and gas, or any other dangerous profession have to pay higher premiums for their insurance cover.

5. Your Health History

Insurance companies consider your past health history in determining the premium amount. Therefore, if you are hale and healthy and did not have any chronic ailment or fatal/potential health issues in the past, then the premium charged is low

6. Lifestyle Choices

Many insurers charge a higher premium for people who love to takes risks and involve themselves in risky adventures such as racing cars, sky diving, mountain climbing, or other high-risk activities. 

7. Your Current Health Status

Insurance companies ask the policy buyer to undergo some mandatory medical tests such as checking blood sugar level, cholesterol level, blood pressure level, among others, before assigning the policy for determining the policy buyer’s current health status and for deciding the premium amount. For medically fit policy buyers the premium is usually low.

8. Policy Tenure and Death Benefit

Policy tenure plays a crucial role in determining the premium rates. The longer the tenure, the higher the death claim amount, hence the premium too would be high. Hence long-term policy is more expensive than the policy taken for a shorter duration.

9. Obesity

This factor that affects your premium since being obese can lead to a number of health problems such as high blood pressure, osteoarthritis, stroke, cancer, and coronary heart diseases, and also increasing your premium rates.

10. Gender

Women are believed to live 5 years more than men at the minimum. Therefore, they pay premium for a longer period however at lower rate.

You May Also Like to Read:- 5 Reasons To Purchase Term Insurance Plans

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Life insurance premiums are based on a number of factors, and it can be quite challenging for a few people to understand them. The above factors carry different weights and differ based on several factors. In what way the above factors impact your premium rates depends on the insurer company and the way they treat the above factors and the combination of them

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