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How Is the Term Insurance Premium Determined?

Published On Jul 13, 2021

Term insurance plans usually have affordable premiums that make this type of insurance a popular and convenient option. The premium for a term insurance plan is the regular amount that you have to pay to keep the plan active. The premium contributes to your insurance cover and savings. However, you may often notice a difference in premium amounts. 

How Is Term Insurance Premium Determined?

There are several factors that determine your term insurance premium. Find out what they are so that you can purchase the best term insurance policy for yourself. Here are some of the most important ones:

  1. Age

    The most crucial factor that determines your term insurance premium is your age. As you grow older, the risks associated with you will be more, especially if you have any kind of illness. Moreover, you will also have comparatively less time to save up for your goals. This is why the premium rates are higher as you grow older and why you must purchase a term insurance policy as early as possible.
  2. Lifestyle Habits

    Your lifestyle habits such as smoking and drinking can negatively impact your term insurance plan premium. As they increase the risk of various health problems and complications, policyholders partaking in such activities are charged higher premiums. Non-smokers and non-drinkers enjoy significantly lesser premium rates.
  3. Gender

    Women generally live longer than men and therefore, have lower risks associated with them. This is why most term insurance companies charge a lower premium for women than they do for men.
  4. Occupation

    Your occupation plays an important role in determining your term insurance premium. If you are working in any high-risk areas such as mining, nuclear research etc, you will have to pay a higher premium. Those who work in regular or relatively safer environments, and possess low risks due to work, enjoy lower premium rates.
  5. Policy Term

    The shorter your policy term, the more premium you will have to pay. Since you are buying a term insurance plan, you would want to save up a significant amount before the end of the policy term. The longer you save, the more you can save up at low rates, without any immediacy. 
  6. Health Status

    Most term insurance plans require you to take a full-body health check-up before the insurance provider approves the plan application. This is because the risks associated with you depends on your health. If you have any terminal or critical illnesses, you will have to pay a higher premium amount.

You May Also Like to Read: What is the Maximum Age Limit in Term Life Insurance Policy?

Types of Term Insurance Plans


Several such factors determine your term insurance premium. Knowing about them can help you strategize and get the best premium rates. In general, term insurance plans charge lower premium amounts than most other types of insurance plans.

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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