Factors Affecting Term Insurance Premiums

2021-05-09

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The Indian economy has grown rapidly in the last few decades and the financial sector has been at the forefront of the growth. Within the financial sector, the insurance sector has witnessed significant growth. The number and type of insurance products have increased manifold, giving customers a wide array of choices. Term insurance is one of the most popular choices in the market. A term plan is the simplest and most affordable type of life insurance.

Term insurance does not have an investment component and pays the sum assured to the nominee in the event of the death of the insured. The policy simply terminates if the insured outlives the tenure. Term insurance with return of premiums gives back the premiums paid during the policy tenure if the insured survives the tenure. Terms plans provide substantial coverage at affordable premiums.

However, various factors affect the premium of a term plan like:

Age
Gender
Smoking
Drinking
Medical History
Profession
Lifestyle

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Major Key Factors that Affect Term Life Insurance Premiums

Age: One of the most important factors affecting premiums of a term insurance plan is the age of the insured. The premium is based on the perceived risk of the insured and older people are more likely to contract a disease or die. Higher risk results in a higher premium for older people. The premiums are relatively low when the insured is young as the risk is also lower. Younger policyholders also pay more premiums as the policy tenure is higher. The premium of a regular-term plan increases with age.
Gender: Contrary to popular perception, gender plays an important role in the premium of a term plan. Both males and females have different life expectancy rates, Women are more likely to live a longer life, which leads them to take a policy with longer tenure. Females pay a larger amount as premiums, which is evenly distributed by the insurer resulting in lower premiums for women.
Smoking: Smokers have to pay a higher premium than a normal policyholder. Generally, the premium for smokers is twice as much as a non-smoker. The higher premium is due to the higher risk of contracting a disease, which increases the risk for the insurance company.
Drinking: The cautionary note written on the back of liquor bottles is meant to be taken seriously. Alcohol consumption is not just injurious to health but also for your wallet. People who drink alcohol are at risk of serious diseases, especially liver-related diseases. Insurance companies charge a higher amount to cover the risk. The insurer asks about the drinking and smoking habits before issuing the policy. It is advisable to be honest while filling the details as the wrong information can lead to the denial of claims.
Medical History: Even after leading a healthy lifestyle some diseases cannot be avoided. Certain diseases like diabetes are a result of genetics. If you have a medical history of heart or other ailments, insurance companies will charge a higher premium.
Professions: People take up different professions to earn a living. However, all professions are not equal when term plans are concerned. People employed in the mining, oil and gas and fisheries sector are more likely to be involved in an accident than someone working before a desk. Along with mining and fisheries, there are a number of hazardous industries. The premium for people employed in hazardous sectors increases by a wide margin in comparison to a regular person.
Lifestyle: The lifestyle of the insured can affect the premium of a term plan. Many people like to live a life full of adventures. People involved in car racing or rock climbing. The premiums for anyone taking part in risky activities are higher than those of other people.

Conclusion:

The premium of a is not static and changes as per various variables. The age, gender, and even the occupation of the insured have an impact on the premiums. The premiums may be different for people in different age groups and occupations, but it is important to have term insurance. If you are looking for a flexible term insurance option, you can opt for the Canara HSBC Life Insurance iSelect Smart360 Term Plan. This plan can be customized as per the customer’s needs.

Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.