What Factors Determine Endowment Policy Premiums?

An endowment policy can be regarded as one where assets and insurance are combined in one policy. In these policies, you can save money over time so that you may receive a cash payment when the policy matures. However, for this, you need to make sure that you – the policyholder – have survived when said period comes. You can also use these policies to create a financial safeguard for yourself as well as your family members following retirement. The money that you get from such a policy also helps you fulfill a wide range of financial obligations. This includes the likes of your child’s education and their marriage.

How Are The Premiums Of These Policies Calculated?

A wide range of factors is used to determine the premium that you have to pay for an endowment insurance plan. We will talk about them in detail right now.

1. The effect of sum assured on premium calculations

If you die within the period when you are covered by the policy the insurers would offer the sum assured to the people who you have nominated to be the beneficiaries of the policy. If the sum assured is a big one the premium would be high too.

2. The effect of age on premium calculations

When it comes to determining the premium of an endowment policy, age is an important factor as well. Remember that the older you get the costlier these policies become. This is because when we get older our bodies become host to various diseases and ailments. This is why if you wish to save money on the premium of these policies it would be better if you buy them when you are younger.

3. The effect of gender on premium calculations

When insurers calculate the premium of an endowment plan they also take into account the gender of the insured. In some cases, these companies use statistical models to compute how long the insured would live. It has been shown in several studies that women normally live five years more than men. This is the reason why they have to pay lower premium rates than men.

4. The effect of cigarette and tobacco usage on premium calculations

It has normally been seen that people who do not use tobacco in any form such as smoking cigarettes live longer and healthier lives.

It is common knowledge that people who partake in these activities would contract a wide range of severe illnesses some of which can become deadly with time as well. This includes the likes of lung cancer and throat cancer. This is why such people have to pay a higher premium when they try to buy endowment insurance compared to ones who do not have such habits.

5. The effect of your medical background on premium calculations

The insurers also look at the medical past of people who apply to buy these policies. As such, it affects the premium that they have to pay in these cases. So, if you have a history of suffering from a critical illness or if you are presently suffering from a major ailment, be ready to pay a high premium for your endowment policy. There can be no doubt about this. The most prominent examples of such ailments are urgent and potentially life-threatening disorders such as cancer, type 1 diabetes, heart illness, and liver disease. So, if you are or have suffered from any of these ailments you can be sure that you would have to pay a higher premium.

Conclusion 

When you buy an endowment plan you pay a premium as long as you are supposed to as per the contractual agreement you have with the insurer. When you reach the retirement age or maturity of the policy you collect the fruits of the same in the shape of the sum assured that the insurer is contractually obligated to pay you. So, if you are looking for guaranteed money – and also a lot of it – it is better that you buy the policies that we are talking about over here.

Also Read: What Is Preferable: FD Or EPF?