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How Is An Endowment Policy's Premium Calculated?

Updated On Feb 10, 2022

Endowment insurance is a type of insurance that combines insurance and assets into a single policy. It allows you to save continuously over a predetermined period of time in order to get a cash payment at policy completion if the beneficiary lives to the end of the policy term. It can also be used to safeguard yourself and your family once you retire, as well as to meet a variety of financial demands like funding for your children's future, marriage, or home purchase. Endowment plans require you to pay a fee for a specified period of time in exchange for a lump sum payment at the end. The cost might be collected over time, on a regular basis, or all at once during the policy period. If a policyholder dies after the term has expired, the insurance company pays a sum promised, which is a specified minimum.

How Is An Endowment Policy's Premium Calculated?

How Are Endowment Plan Premiums Calculated?

A variety of things influence the premium amount of an endowment policy. The following are some significant factors that endowment service providers typically consider when determining the premium level of endowment insurance:

  • Assured Sum

In the case of the policyholder's death during the policy term, the Sum Assured is the amount of support received by the beneficiary or beneficiaries. A larger policy premium is usually associated with a higher sum assured.

  • Age

Your age is another a significant factor to consider when calculating your monthly premium. The higher the price, the younger the policyholder at the time of purchase. The main reason for this circumstance is that growing older comes with a number of health risks. Buying an insurance policy when you're younger saves money because premiums are more likely to climb as you get older.

  • Gender

When calculating premiums, gender is also taken into account. Several assurers utilise a statistical model to determine the assured's lifetime. Several studies show that a woman lives around 5 years longer than a guy. As a result, women's premiums are lower than men's.

  • Tobacco And Smoking

People who do not smoke or use tobacco products live healthier and longer lives, which is a well-known fact. Tobacco users and smokers are more prone to acquire a variety of serious and potentially fatal diseases, including throat cancer and lung cancer. As a result, they must spend more than those who do not use these products. Tobacco users pay a greater premium than nonsmokers since they have consumed any form of tobacco product in the past year.

  • Medical Background

A person's previous medical history is also considered because it affects the premium amount. If an applicant has had or is presently suffering from a major or critical disease, the premium cost will almost probably increase. Cancer, heart problems, type 1 diabetes, liver issues, and other potentially life-threatening or urgent conditions are likely to raise the premium amount.

  • Bonus

Customers who purchase insurance will be eligible for a reversionary bonus upon maturity or death. At the end of the game, bonuses are given out. When the insurance matures, the assurer will pay the policyholder a bonus from its profits. Following the expiration or death of a policy, an assurer may offer a cash incentive.


When you enroll in an endowment program, you pay premiums over time and receive the whole bonus when you reach retirement age. The insured money is provided in its whole at maturity, making it more appealing to consumers who require a large sum of money all at once.

Also read - Know How Endowment Policy Helps In Wealth Creation

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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