Term life insurance is one of the oldest, simplest, basic and traditional forms of life insurance. It aims to safeguard your loved ones’ financial needs in case of your premature demise. It gets you a considerably large cover at a relatively low premium. That’s the reason it is so popular and highly recommended to everyone wanting to buy life insurance.
Let’s look at the factors that affect your insurance premium.
1. Age
Age is a major factor in determining term life insurance premiums. As people’s age increases, the mortality rate also increases. Insurers divide applicants as per slabs of age groups and assign a value to each age group. The older your age, the higher your premium will be. That’s why it’s a good idea to buy term life insurance when you are younger.
2. Gender
Gender is related to the mortality rate. Generally, women have a longer lifespan than men. Thus the mortality rate associated with women is less than that with men of the same age bracket. The premium too is lesser for a woman than a man of the same age group.
3. Occupation
Your occupation determines your lifestyle, and it’s related to your mortality rate. Insurers categorise occupations as follows:
- Category 1: Contains highly specialised jobs like a surgeon, teacher, lawyer etc.
- Category 2: Semi-skilled jobs without physical labour. Most desk jobs fall under this category.
- Category 3: Unskilled jobs involving physical labour like mining, farming etc.
Jobs under Category 2 are considered less risky and enjoy lower premiums. Jobs in the other two categories attract higher premiums than those in Category 2.
4. Region of Residence
Your region of residence has a mortality risk associated with it. Regions prone to natural disasters like tsunamis, earthquakes, cyclones etc., are classified as high-risk regions. Your insurance premium might be higher if you stay in a high-risk region.
5. Health and Lifestyle
Smoking, tobacco consumption in other forms, alcohol consumption and abuse of similar substances increases mortality risk. It, in turn, also increases your insurance premium.
Similarly, family history of lifestyle diseases is also a factor. If, for example, your family has a history of diabetes, it may lead to other diseases.
If you have a pre-existing health condition, your premium may be higher. In some cases, the insurer may offer the policy after excluding the coverage for your condition.
6. Additional Riders and Benefits
- Accidental Death
Accidental death benefit comes with a small additional increase in premium. It also covers the cost of legal and medical formalities in case of accidental death.
- Permanent Disability Due to an Accident
You can choose how you want to avail this benefit. Either you can get a waiver on future premium payments or a lump sum amount. It will come at a small additional cost on your premium.
- Critical Illness Cover
Illnesses like cancer, stroke, certain cardiac conditions, paralysis etc., are called critical illnesses. Their development, outcomes and treatments are not easily predictable. The cost of treatment of these illnesses also tends to be very high.
These critical illnesses can be covered as an additional benefit at an addition to the premium. You will get a lump sum amount if you are diagnosed with any of these illnesses.
7. Term of the Policy
Term or tenure is the number of years that the policy covers you. As a general rule: The longer the term, the greater the premium will be.
These seven factors have a major say in deciding your term life insurance premiums. Understand them to make an informed decision about the correct term life insurance policy for you.
Read more about How to Select the Best Term Life Insurance Online?
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