Top Risk Factors That Can Affect Your Term Insurance Premium: How Insurers Decide Your Term Insurance Premium

What is Term Insurance?

A term insurance plan is a type of life insurance that is designed solely for building life cover. Under this type of plan, the insurance company promises to pay a lump sum amount known as the death benefit to the beneficiary in case of the untimely demise of the insured. Unlike other types of life insurance plans, a term plan comes to an end if the insured survives the policy tenure.

A term plan is often considered one of the most affordable ways of building life cover. However, while offering coverage and deciding the premium under a term plan, the insurance company evaluates the risk factors of the policy seeker. The relation between high-risk and low-risk policyholders is a crucial aspect of term plan coverage and premiums.

Risk Factors Affecting Term Insurance

If you are planning to purchase a reliable term insurance plan, you must understand the top risk factors that can affect the premium you have to pay under the plan. Here are some common risk factors in term insurance, across different insurance companies:

Your Age

The simple rule of term insurance is that the earlier you purchase a plan, the cheaper your premium. As your age increases, the premium climbs simultaneously. While evaluating the risk factors, age becomes a crucial aspect for the insurers. This is simply because with age, certain medical risk also keeps increasing.

To give you a simple example, imagine that you are purchasing a term plan in your 20s and the premium is ₹3000. The same premium increases by 5% in your 30s, around 31% in your 40s, and so on.1

Your Lifestyle Habits

Your lifestyle choices say a lot about your health and are also linked to your term plan premium. Insurance companies often increase the premiums for policy seekers with unhealthy lifestyle choices like consuming injurious substances, not indulging in any kind of physical activity, etc. This again is taken into consideration because individuals with such unhealthy lifestyle habits are more prone to getting life-threatening diseases, and the claims being raised with the insurance company increase.

The Profession You Are In

This might come as a shock, but even the profession of a policy seeker becomes a factor while evaluating risk. Individuals working in dangerous environments or a profession that might be hazardous, such as coal or mine workers, often end up paying higher premiums for the same coverage that an individual with a regular desk job or safe profession has to pay.

Did you know that premiums and life insurance are more likely to increase due to such factors as compared to health insurance?

Your Medical History

An individual's medical history is also evaluated to see if there is an adverse risk of sickness or critical illnesses in the family. This is simply because there are certain diseases and medical conditions that run through genes that increase the chances of policy seekers getting those diseases in future.

How to Lower Your Term Plan Premium?

By now, you must have understood the relation between the highest and lowest policyholder with the term insurance premium. But does that mean that you cannot do anything to lower your term insurance premium? No. Let’s take a look at some of the steps that you can start taking today to reduce the chances of a higher premium while purchasing a term plan:

Maintain a Healthy Lifestyle

Maintaining a healthy lifestyle goes a long way not just in keeping you healthier and fitter but also in reducing the premium amount for your term insurance plan. Remember that when it comes to town insurance, a healthy lifestyle choice works as a currency.

Smartly Choose the Premium Payment Frequency

Term insurance policies often come with different options of premium payment, like monthly, quarterly, half-yearly, or annually. Many insurance companies offer single-premium policies, which sometimes result in an impressive discount. Keep in mind that missing the payment window may cause your policy to lapse. So choose the premium payment frequency you can comfortably follow.

Start Young

Starting young has a direct impact on the kind of coverage you can get and also the premium you pay under a term plan. The younger you start, the lower your premium.

To Conclude

Insurers decide the term insurance premium by evaluating the risk associated with you. Factors like your medical history, your lifestyle choices, your age, gender, profession, etc, are evaluated to see whether you are a high-risk or low-risk individual.

To learn more about term insurance policies and explore the best term plan, head to the Jio Insurance Broking portal today.