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How Is Endowment Policy's Premium Calculated?

Updated On Feb 25, 2022

Endowment insurance is a form of coverage that combines insurance and assets into one package. It allows you to save money over a certain length of time in order to receive a cash payment at the conclusion of the policy term if the beneficiary lives to the end of the term. It can also be used to protect yourself and your family after you retire, as well as to satisfy a range of financial needs such as paying your children's education, marriage, or home purchase. Endowment plans entail paying a monthly charge for a set amount of time in exchange for a lump sum payment at the end. During the insurance period, the cost may be collected over time, on a regular basis, or all at once.If a policyholder dies after the term has elapsed, the insurance company must pay a certain minimum amount.

How Is Endowment Policy's Premium Calculated?

How are Premiums For Endowment Plans Calculated?

The premium amount of an endowment policy is influenced by a number of factors. Endowment service providers often consider the following key aspects when determining the premium level of endowment insurance:

Sum Assured

The Sum Assured is the amount of support received by the beneficiary or beneficiaries in the event of the policyholder's death within the policy term. A bigger sum assured is usually coupled with a higher policy premium.


When determining your monthly premium, your age is another important element to consider. The younger the policyholder at the time of purchase, the higher the price. The main reason for this is that becoming older brings with it a slew of health concerns. Because prices are more likely to rise as you get older, buying an insurance coverage when you're younger saves you money.


Gender is taken into account while determining premiums. A statistical model is used by some assurers to determine the assured's lifetime. According to several studies, a woman lives about 5 years longer than a man. As a result, women's insurance premiums are less expensive than men's.

Tobacco and Cigarette Smoking

It is a well-known truth that people who do not smoke or use tobacco products live healthier and longer lives. Tobacco users and smokers are at an increased risk of developing a number of serious and potentially fatal diseases, such as throat cancer and lung cancer. As a result, they are required to spend more money than individuals who do not use these products. Since they have consumed any sort of tobacco product in the previous year, tobacco users pay a higher premium than nonsmokers.

Medical Background

The previous medical history of a person is also taken into account because it has an impact on the premium amount. The premium cost will almost certainly increase if an applicant has had or is now suffering from a serious or critical disease. Cancer, heart disease, type 1 diabetes, liver disease, and other potentially life-threatening or urgent diseases will almost certainly increase the premium amount.


Customers who buy insurance will be entitled for a reversionary bonus if they die or reach the age of maturity. Bonuses are awarded at the conclusion of the game. The assurer will pay the policyholder a bonus from its profits when the insurance matures. An assurer may offer a monetary incentive after a policy's expiration or death.


You pay premiums over time and earn the entire bonus when you reach retirement age when you enroll in an endowment program. Consumers who demand a significant sum of money all at once will find it more enticing because the insured money is provided in its whole at maturity.

You may also like: Who Should Invest In An Endowment Plan?

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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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