The concept of buying Term insurance in India is finally gaining momentum thanks to huge awareness for buying personal life insurance is finally increasing. In the urban India, due to unseemly lifestyle, life has become so unpredictable. People are becoming prone to various terminal illnesses and several accidents etc. Term insurance protects you from suffering from huge financial losses incurred due to untimely death. Also Read: Term Insurance-True protection for your loved ones!
Term insurance premium rate is the money charged by the insurance provider for the coverage that they provide. It differs from company to company. You must know that how does the Insurance Companies calculate your premium rate that the prospective buyer is required to pay? Also Read: Why Online Term Insurance Cheap?
There are numerous factors that affect the cost of the Term insurance premium rate.

 

·        Age of Term Insurance Applicant
Age is an imperative factor which decided the premium rate. All other things being equal, the younger you are the lower your rate will be. This is simply because you are less likely to pass away when you are younger. This is why insurance experts recommend buying a policy young. 

·        Your Current Health History
Your medical records will be an important deciding factor for charging premium. You will generally have to undergo a medical exam to look for things like high blood pressure or other health concerns that might be a sign of future problems. People who are currently in good health will see lower rates. 

·        Your Current intake Habits
Habits such as smoking, chewing tobacco and heavy alcohol consumption will have to pay more for life insurance simply because of the many risks to health and life inherent in the habit of smoking. If you quit smoking, you can qualify for lower rates within a year – just one of the good reasons to quit. 

·        Your Gender
Gender equality is a good thing, but your gender does say something about your life expectancy. Women live longer than men as a general rule, which means that they will pay generally lower rates for life insurance. 

·        Your Amount Coverage
The sum assured opted for, by an individual, is another deciding factor of the premium. The higher the sum assured, the higher the premium and vice-versa. Also Read: Don’t buy Life Insurance, Buy adequate Cover!
·        Tenure of the policy
The longer the term of the policy and the larger the amount of the death benefit the more you will pay for it. Long term policies are more expensive than short terms, and whole, or permanent life insurance is generally more expensive that any length of term. 

The amount of the premium charged by the insurance company is determined by the statistics and mathematical calculations done by the underwriting department of the insurance company. Each insurance company generally has a base premium rate. The company creates its base insurance premium rate on factors that include amount it is paying to the operating costs, stock rates and profit margin. How much impact each of these has on your rates depends on how the insurance company rates each factor and also on the combined effect of multiple factors. 

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Suresh Kumar Narula

SEBI Investment Advisor, Founder & Principal Financial Planner at Prudent Financial Planners
Suresh K Narula is founder and Principal Financial Planner at Prudent Financial Planners. He has earned the professional CERITIFIED FINANCIAL PLANNER and got registered with SEBI as Investment Advisor. He writes on personal and financial planning articles and got published in Dainik Bhaskar, Business Bhaskar and The Financial Planner's Guild, India. He is also a member of Financial Planner's Guild India ( An association of practicing SEBI registered Investment advisers) to create awareness about Financial Planning in general public, promote professional excellence and ensure high quality practice standards. Suresh received his an M.com from Himachal Pardesh University and an MFC from Punjab University, Chandigarh. He can be reached at info@prudentfp.in
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