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6 Major Factors Affecting Life Insurance Premiums 

Keep a tab on the factors affecting the life insurance premium and get the best features in the life insurance policy.

Insurance plans are for the security of our loved ones. However, many people often refrain from buying a life insurance plan to avoid paying costly premiums or think they don’t need it. This puts their family welfare at risk in case of their sudden death.

Buying a life insurance scheme should be one of the first steps of financial planning. However, it is also important to ensure you buy a plan that you can afford. Paying premiums every year can take a toll on you and your finances if not planned well.

Let’s know about the key factors affecting the life insurance premiums –

1. Age

Age is a significant factor that determines life insurance premiums. For this reason, insurance experts urge people to buy their life insurance policy at a younger age.

The age factor drives the premium amount on a simple logic – Younger policyholders derive the best value from their life insurance plan because they carry a lesser risk of dying before the maturity of their insurance term. In simpler words, they are more likely to outlive their life policy.

2. Gender

This is not about gender inequality but about a statistical fact. Researches have proven that women tend to live longer than men. Therefore, for female policyholders, the insurers don’t mind demanding a lesser premium amount.

3. Body Structure

The body structure of the policyholders tells a lot about their overall health, thus determining the premium cost. Indicators like body mass index (BMI), which indicates the height and weight of the person, help in health assessment. Understandably, an obese person will live with the risk of capturing several diseases.

4. Medical History

At the time of application, the insurer considers the individual’s and family’s medical history for determining the premiums. Needless to say, healthier people qualify for lower premium rates as they are less likely to die during the policy tenure. Some insurers may even ask for a medical test to get the history of illnesses like heart ailments, respiratory diseases, diabetes, blood pressure, cancers, substance dependence, etc. Those who have some underlying health issues individually or in the family may be offered costlier premium or selective coverage options.

5. Tobacco Use

Tobacco users certainly must pay more life insurance premiums vis-à-vis non-tobacco users. This is because the insurance companies consider all levels of tobacco usage, from mild to strong, as a deciding factor for the eligibility, coverage, and premium rates.

Many of the insurers provide a waiting period for tobacco users to quit tobacco and qualify for rates applicable to non-tobacco users.

6. Occupation and Pastimes

High-risk occupations come with the risk of losing a life. Thus, jobs involving construction, military combat, drilling, mining, aviation, marine, fire-fighting, etc. have to buy expensive life insurance policies. People in such risky jobs remain prone to loss of life, diseases, and disabilities, thus are offered costly policies with additional coverage.

Even hobbies are deciding factors. Dangerous activities like car racing, mountain climbing, skydiving, rock climbing, etc. will keep the lives on tenterhooks, again impacting the eligibility of a life insurance plan and the premium rate.

Additional Factors Affecting Premiums

  • Policy Type – Permanent life insurance is costlier than term life insurance
  • Coverage – Wider coverage makes the premium rate go up
  • Tenure – A longer policy tenure costs more than the shorter term
  • Riders – Riders customize the coverage but increase the premium

Customers must consider their factors in sync with the coverage expected from the life insurance plans. Check the insurer’s rating system and strike a balance to achieve an affordable premium.

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