Your insurance premium depends on a host of factors. There is no fixed premium amount for all insurance policies. Thus, you could be paying a premium that’s way lower than your friend who got his term insurance last month. Before you take out that Term insurance premium calculator and start assessing your monthly premium, take a look at the factors that affect the premium.
#1 Age
The most important factor in determining term insurance premium is age. The mortality rate typically increases with age, and your premium increases in tandem. In fact, insurance providers have a fixed percentage system they follow to increase their premiums with age. Therefore, it is always advisable to buy term insurance when you are young or just starting your career.
#2 Gender
Gender is another factor that is typically related to mortality. Across the world, it has been seen that women tend to live longer than men. Therefore, if a woman and a man are in the same age group, then the former will have a lower premium than the latter.
#3 Lifestyle factors
Certain habits, such as smoking, regular alcohol abuse, and tobacco use, impact life expectancy. You are at a greater risk of falling seriously ill if you have such lifestyle habits. Thus, your insurance premium is going to be higher. As you can understand, staying healthy and adopting better fitness habits helps you to not just stay away from diseases but also gets you a lower premium.
#4 Occupation
A lot depends on what you do for a living. If you work in a position that is particularly hazardous to physical and mental health, then expect to pay a higher premium than usual. Such stressful jobs also impact your life expectancy and mortality, which explains why you are asked to pay a higher premium. Typically, insurance companies have their own classification of jobs and their risk levels. So, you will be charged accordingly.
#5 Existing medical conditions
In most cases, you will be asked to take a medical test before you get the policy. The test will reveal your health status to the insurer. If you already have certain health conditions for which you are undergoing treatment, then you will be charged a higher monthly premium.
#6 Residential area
Though the mortality rates are different for different regions, this difference must be significant enough for the insurer to actually consider it. For instance, maybe you stay in an area that floods every year or has been demarcated as a high seismic zone. In that case, your premium will increase considerably.
#7 Getting add-on benefits
You can get a host of add-on benefits or riders with your term insurance policy. For instance, there are accidental death benefit riders, premium waiver riders, accelerated death benefit riders, and so on. Adding a rider increases your insurance premium.
Hopefully, the reasons why your premium seems high or low is clear to you by now. It is time to talk to an insurer to know more about it.
