When buying life cover, one of the first things people notice is the premium. But what exactly decides the cost of your term insurance premiums? The answer lies in a few key factors such as your age, health, lifestyle, and the type of cover you choose. Understanding how these elements impact your premium can help you plan more effectively and avoid unexpected costs later. Whether you’re looking for basic protection or something more flexible, knowing what influences the cost puts you in control. This guide breaks it down simply, allowing you to make informed choices about your coverage and budget.
What is a Term Insurance Premium?
A term insurance premium is the regular payment you make to your insurer to keep your policy active. In exchange, the insurance company provides your family with a pre-decided financial cover in case something unfortunate, like the demise of the policyholder, occurs during the policy term.
Example:
Let’s say Rahul is 30 years old and buys a term insurance policy with a sum assured of Rs. 50 lakh for a term of 30 years. He chooses to pay a yearly premium of Rs. 5,000. As long as Rahul pays this amount annually, the policy remains active. If something unfortunate happens to him within those 30 years, the insurer may provide Rs. 50 lakh to his nominee, based on the policy terms and conditions.
But your premium isn’t randomly decided. It is calculated using a range of factors, out of which some can be controlled and some can not. Let’s check out those factors below:
1. Age and Gender
Age matters when doing a term insurance comparison. If you are younger when you buy the policy, your premium is usually lower. This is because younger people are often healthier, so the risk to the insurer is less.
Gender can also make a difference. On average, women tend to live longer than men. As a result, they may receive slightly lower premiums in some cases.
2. Health and Lifestyle Habits
If you’re someone who exercises regularly and avoids harmful habits like smoking or excessive drinking, you’re likely to be rewarded with a lower premium. Lifestyle-related diseases can drive your premium up, so insurers consider your health history and current habits during underwriting.
Pro tip: Quitting smoking or getting regular health check-ups may reduce your premium over time.
3. Sum Assured (Coverage Amount)
The term’ insurance sum assured’ refers to the financial safety net you want to leave behind. Naturally, a higher sum assured results in a higher premium. That said, the right amount of coverage should be based on your income, family expenses, liabilities, and future goals.
4. Policy Term
How long do you want to stay protected? The longer your policy term, the higher the chances of a claim, which can make your premium slightly more expensive. However, longer terms offer the peace of mind of extended coverage, especially during your family’s financially dependent years.
5. Occupation and Hobbies
Do you work in a hazardous environment like construction, mining, or aviation? Or are you into extreme sports, such as scuba diving or rock climbing? These factors can raise your premium, as they increase the risk of premature death.
6. Medical Test Results
Most insurers require a medical test before issuing a term insurance policy. The test helps determine your current health status. Good health may lower your premium, while health concerns, like high blood pressure or diabetes, may push it higher.
7. Location and Living Conditions
Where you live also plays a role. If you reside in a heavily polluted urban city, your risk of respiratory or lifestyle-related diseases increases, which may influence your premium. On the other hand, those living in cleaner, low-risk areas may enjoy slightly lower rates.
8. Family Medical History
If your family has a history of genetic or chronic illnesses such as heart disease, cancer, or diabetes, insurers may charge you a higher premium, even if you’re healthy now. That’s because hereditary factors increase your long-term risk profile.
Why Use a Term Insurance Calculator?
A term insurance comparison is crucial before choosing the right plan. You can use a free online term insurance calculator to estimate your premium based on the factors we discussed. While the final amount may vary after medical exams and underwriting, it gives you a strong starting point to plan your finances accordingly.
Final Thoughts
When it comes to securing your family’s financial future, knowledge is power. Understanding what drives your term insurance premium helps you make better decisions, optimize costs, and avoid being underinsured.
It’s not just about picking any plan. It’s about finding the one that fits your needs. With options like Aviva India’s 3D Digital Plan and a focus on offering transparent insurance products, planning for life’s uncertainties becomes clearer and more manageable.
Let your life’s journey be backed by the security your loved ones deserve. Because a well-chosen term insurance plan isn’t just a financial product. It’s a promise.
