Life Insurance can be defined as a contract between an insurance policy holder and an insurance company, where the insurer promises to pay a sum of money in exchange for a premium, upon the death of an insured person or after a set period. As an individual, you pay premiums for a specific term and in return, you are provided with a Life Cover. This Life Cover secures your loved ones’ future by paying a lump sum amount in case of an unfortunate event. In some policies, you are paid an amount called Maturity Benefit at the end of the policy term.
Now that you know what is life insurance and why you need it, find out the factors that can affect the life insurance premium:
- Age: One of the prime factors that affect the premium for a life insurance plan is your age. The life insurance premium is lower for younger people and gradually increases with age
- Gender: Studies have shown women live longer than men. Therefore, the life insurance premium is lower for women as compared to men
- Health conditions: Your present and past health conditions can determine the premium for your life insurance plan. If you have any pre-existing illnesses or have suffered from an illness in the past that may resurface or affect your present health, you would be charged a higher premium
- Family health history: The chances of suffering from a disease that runs in your family are considerably high. So, if any hereditary illnesses run in your family, you may have to pay a higher premium
- Smoking and drinking alcohol: Lifestyle habits like smoking and drinking alcohol can impact your health and lead to multiple health issues. Therefore, insurance companies charge a high premium for individuals who smoke or drink alcohol
- Type of Coverage: The type of coverage you opt for can increase or decrease the life insurance plan’s premium. If you add any riders to your plan, the premium would increase. A longer policy term can also result in a higher premium compared to a shorter term. In addition to this, the type of life insurance plan you select also impacts the premium. For instance, term life insurance is the most affordable form of life insurance Amount of coverage: A higher sum assured would result in a higher premium and vice versa
- Occupation: If you work in a high-risk job, the premium for your life insurance plan would be higher than others. For example, if you work in construction or if your job puts you at any kind of risk, such as regular exposure to chemicals, the insurance company will charge a higher premium