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How Life Insurance Companies Determine Insurance Premium Quotes?

Published On Aug 21, 2021 9:00 AM By Yamini Sharma

If you are new to the world of life insurance, know that different life insurance companies offer different plans with different benefits. Moreover, premiums for different plans are different. So, if you have decided to buy a life insurance policy to secure the financial future of your loved ones, know that every policy of an insurance company will have a different premium. 

Another significant fact that you must be aware of is that the premium payable under a life insurance policy differs based on the policy buyer’s age, gender, chosen coverage or sum assured amount, medical history, lifestyle, annual income and many other factors. Furthermore, you can expect the premium for the same life cover to vary from one insurer to another. Let us take a look at how insurance companies determine premiums along with the reasons that make variation between the quoted amounts. 

How Life Insurance Companies Determine Insurance Premium Quotes?

It is important to understand that insurance companies emphasize a few factors that play a significant role in determining premium quotes. They key factors include:

  • Mortality & Underwriting Process

The process of underwriting is of massive importance in determining life insurance premium payable. It must be noted that the underwriting process involves multiple factors like age, gender, lifestyle, policy tenure, chosen coverage in addition to family medical history. What’s more important to note is that different insurance companies have different processes for underwriting and assessing risk. On the basis of assessment, the life insurance company may provide a lower or higher premium for the same insurance coverage. 

The premium amount calculation is also performed on an actuarial basis. The actuarial basis is a statistical method that helps in assessing the insurance risk for an applicant, using the probability of death occurring at a given age level.

Also read: What Type Of Life Insurance Is Suitable For Unmarried People?

  • Profit Margins & Expenses

The premium quoted for insurance coverage differs on the basis of expenses incurred by the insurance company in writing the policy. Every insurance company has a different cost structure, risk assessment process, operational costs, as well as  investment returns. Therefore, they may quote different premium quotes after thorough consideration of various risk cost analysis associated with the policyholder. 

How Should I Calculate Life Insurance Premiums?

While going through an insurance company’s website, you will come across a life insurance premium calculator. You can simply use the life insurance premium calculator to determine the premium payable for the insurance coverage selected by you. Note that you will have to provide your personal details along with plan details. Once you have provided the necessary information, your premium will be displayed along with a summary of the coverage chosen. 

You can also visit the InsuranceDekho website for the premium quotes as well as other plan related information. 

Also read - How Is Claim Settlement Ratio Important While Purchasing A Life Insurance?

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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