7 Factors Influencing Your Life Insurance Premium
Every life insurance plan comprises a protection element and an investment element in different proportions. Few insurance plans, like term life planwith terminal illness covers, are pure protection plans without any investment component.
Learn these 14 reasons you might be paying a higher premium.
Thus, the premium for these plans is affected by the factors which increase the risk to your life or health. The most important factors influencing the risk premium of your life insurance plans are:
1. Your Age
Age is the first factor that is considered for life insurance premiums. First and foremost, your age will define whether you are eligible for the plan. Most life insurance protection plans, like term and health insurance plans, allow you to buy the policy if you fall within a specific age range. For example, between 18 to 65 years.
Second, as you grow older, your risk premium for the life insurance cover increases. That is because the risk premium is based on the mortality rate (rate of death) among the specific age group you belong to.
For example, the term insurance premium for a 22-year-old would be lower than a 35-year-old male.
2. Your Health Condition
Your present health is an important parameter deciding your life insurance premium. Health conditions such as height and weight ratio (BMI), and pre-existing diseases can increase your risk of early death. Thus, you may have to pay a higher risk premium for the same amount of cover.
3. Health History of Your Family
Even if you are healthy at the time of buying the life insurance, you may have a long family history of specific diseases. In such cases, too, your life insurance premium is expected to rise.
4. Your Occupation
Life insurance underwriting principles divide occupations into three to four categories, depending on the combination of physical and mental stress on the job. If you are working in a role that involves dealing with heavy machinery, working in a dangerous environment, your life insurance premium would be higher.
If you have a desk job, you may have a slightly lower risk. Hence, the premium that you have to pay will be lower.
5. Geography or Location
Location is also a consideration while estimating your life insurance premium. Urban centres, like metro cities and state capitals, may enjoy a lower premium than rural areas.
6. Lifestyle Choices & Habits
Lifestyle choices like cigarette smoking or alcohol usage also affect your risk of life and thus the life insurance premium.
7. Other Factors AffectingYour Premium
You can invest in life insurance plans to achieve your future financial goals as well. In such cases, the risk premium is only a small component of the total annual premium you pay. Your life insurance premium will also consider the following factors:
- Your future goal amount
- The Policy Term you opt for
- The tenure for which the premium remains invested
- The riders and additional benefits you selected
