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How Is The Premium Calculated For Endowment Plans?

Updated On Nov 22, 2021

Endowment insurance is a type of insurance coverage that combines insurance and assets into one package. It enables you to save consistently over a set length of time in order to get a cash payment at policy fulfilment if the beneficiary lives to see the end of the policy term. It can also be used to protect yourself and your family once you retire, as well as to meet a range of economic needs such as funding for kids’ future, marriage, or buying a home. Endowment plans end up having to pay a charge for a set length of time in exchange for a lump sum payment at the end. The cost can be collected for a certain amount of time, on a routine basis, or all at once during the policy period. If a policyholder dies beyond the end of the tenure, the insurance company pays a sum assured, which is a predetermined lowest threshold.

How Is The Premium Calculated For Endowment Plans?

The premium amount of an endowment policy is determined by a number of factors. Some critical elements that endowment service providers normally examine when setting the premium level of endowment insurance are listed below:

1. Sum Assured

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

2. Age

Another important consideration when calculating the monthly premium is your age. The greater the policyholder's entry age, the greater the price. The main reason for this situation is that there are various health hazards involved with growing older. Purchasing an insurance plan at a younger age saves money because premium rates are more likely to rise as you get older.

3. Gender

Gender is also a consideration to consider when calculating premiums. A statistical model is used by several assurers to determine the assured's lifetime. According to several research, a woman lives about 5 years longer than a man. As a result, women's premiums are less than men's premiums.

4. Smoking And Tobacco Use

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 more likely to develop a number of serious and life-threatening diseases, such as throat cancer and lung cancer. As a result, they have to pay a higher price than others who do not use these products. Tobacco users pay a higher premium than non-smokers since they have ingested any type of tobacco product in the previous 12 months.

5. Medical History

An individual's previous medical history is also taken into account because it has an impact on the premium amount. If an applicant has previously suffered from or is currently suffering from a serious or critical disease, the premium amount will almost certainly increase. Cancer, heart difficulties, type 1 diabetes, liver disorders, and other life-threatening ailments or critical illnesses are likely to increase the premium amount.

6. Bonus

Customers who buy insurance will get a reversionary bonus upon maturity or demise. Bonuses are awarded at the conclusion of the game. The assurer will give the policyholder a bonus from its profits when the policy achieves maturity. An assurer may provide a cash bonus after a policy's expiration or death.


When you invest in an endowment program, you pay the premiums throughout the period and gain a full bonus when you reach retirement age. The assured money is delivered in its whole at maturity, making it more appealing to customers who want a substantial quantity of money all at once.

Insurance costs are determined based on the investment's selected Sum Assured on Maturity. For the term you specify, you must pay a fee. At maturity, you'll receive Maturity Benefit, which would be the Sum Assured on Maturity + any interest earned.

Also Read: Benefits Of An Endowment Policy Which Makes It A Must Have

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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