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The premium payable under a life insurance policy varies according to the policy buyer’s age, selected coverage (or Sum Assured), medical history, gender, lifestyle, and annual income, among other factors. Moreover, the amount of premium for the same life coverage may vary from one insurer to another. Here is an insight into the calculation of life insurance premiums and reasons why the quoted amount varies between insurers.
Factors that Contribute to Differential Premium Quotes between Insurance Companies
Factors that work as key determinants for insurers, while determining the life insurance premium quotes include –
1. Mortality and Underwriting Process
Insurance companies determine the life insurance premium payable through the process of underwriting. The underwriting process considers various factors, including your age, gender, lifestyle, policy tenure, opted overage, and family medical history. Different insurance companies have a different process for underwriting and assessing risk, and based upon the assessment, may offer a lower or higher premium for the same insurance coverage. The amount of premium also calculated on an actuarial basis, which is essentially a statistical method to assess the insurance risk for an applicant, using the probability of death occurring at a given age level.
2. Profit Margins and Expenses
The premium amount quoted for life insurance coverage varies based on the expenses incurred by the insurance company in writing the policy. Insurance companies have different cost structures, risk assessment processes, operational costs, and investment returns. Subsequently, they may quote different premium quotes after considering various risk cost analysis factors related to the policy applicant.
How to Calculate Life Insurance Premiums
Insurance companies offer different life insurance premium calculators on their websites, which you can use to determine the premium payable for the chosen insurance coverage.
The process of using a life insurance premium calculator is easy – you provide details such as your birth date, annual income, lifestyle habits, and gender. Subsequently, you select the choice of life insurance plan variant, premium payment frequency, the amount and duration of the coverage.
After entering these details, the life insurance calculator will determine and display the amount of premium payable for the intended insurance cover, along with a summary of the opted life insurance coverage. You can review the quoted life insurance premium and use it to compare different policies before choosing one that aligns with your needs and requirements.