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What Is An Endowment Plan’s Premium?

Published On May 25, 2021

Endowment plan is a life insurance plan which provides you with a combination of both i.e.  an insurance cover, as well as savings plan. It helps you in saving regularly over a specific period of time, so that you can get a lump sum amount on policy maturity, if the policyholder survives the policy term. It's also useful for securing yourself and your family post-retirement or to meet various financial needs such as funding for children's education or marriage or buying a house.

In endowment plans, you are required to pay a premium for a fixed period and receive a lump sum at the end of that time. The premium can be paid for a limited period of time, on a regular basis, or once throughout the policy term. If the policyholder unfortunately dies before the end of the policy term, the insurer pays a guaranteed minimum amount, called a sum assured. 

Factors Affecting Endowment Premium Value of Endowment Plans

There are various factors that play an important role in evaluating the premium amount of an endowment policy. Below-mentioned are some crucial factors that endowment service providers usually consider while determining the premium amount of endowment policies:

  • Sum Assured

    Sum Assured is the coverage amount the nominee or beneficiary receives on the unfortunate demise of the policyholder during the policy term. Higher sum assured usually means higher premium amount for the policy.
  • Age

    Age is another critical factor in estimating the premium amount. Higher the entry age of the policyholder, higher the premium amount. The main reason behind this scenario is several health-related risks are associated with older age. Since the premium rates are most likely to increase with age, purchasing an insurance plan at a younger age is cost effective.

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  • Gender

    Gender is also a necessary factor for estimating the premium amount. Many insurers use the statistical model to calculate the longevity of the insured. As per various studies, an average woman lives around 5 years longer than an average man. Thus, the premium amount for women is lower as compared to men.
  • Tobacco or Smoking Habits

     It is a common fact that people who do not have the habit of smoking or consuming tobacco products usually live healthier and longer than those who do. Smokers and tobacco users are more prone to several critical and life-threatening diseases like throat cancer, lung cancer. Hence, they pay a higher premium than the individuals who do not consume these products. People who have consumed any kind of tobacco product in the last 12 months are considered as tobacco users and have to pay more premium than non-smokers. 
  • Medical History

    The past medical history of an individual is also considered because it affects the premium amount. If in the past, any applicant has suffered from any serious or critical illness or is suffering from one at present, the premium amount will most likely go up. Life-threatening diseases or critical illnesses like cancer, heart problems, type-1 diabetes, liver problems etc. are tend to raise the premium amount.

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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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