6 factors that affect your term plan premium
6 factors that affect your term plan premium
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Life is full of uncertain events, and the outbreak of the global pandemic- COVID-19 has made it quite evident. Though you cannot do much about such an unforeseen crisis, you can always try to be prepared in advance, both emotionally and financially, to defy them when they strike.

To safeguard your loved ones from financial perils, buying a term plan can be a great investment. Such a plan not only guarantees a monetary cover to your family but offers some term insurance tax benefits on the premiums paid and benefits received.

Term insurance provides financial assistance and security to your loved ones in case of financial contingencies. It enables your family to claim a lump-sum amount as a death benefit after your untimely demise. Moreover, by opting for a term plan with maturity benefits, you ensure that your family members meet their life goals and maintain their preferred lifestyle in your absence. In addition to this, with the right riders, this plan even covers you against critical illnesses and disabilities.

Increasing demand for term plans

With life’s uncertainties and the COVID-19 pandemic that has triggered panic across the globe, it is critical for everyone to have a term insurance cover that can provide significant financial protection against death and offer financial assistance to their loved ones in case of their sudden demise. The pandemic has made everyone realize that it is better to have an insurance policy and stay protected than to fall prey to uncalled events. The increasing demand for life covers has urged insurance providers to come up with new and improved policies that cater to the different needs of every individual.

However, among all the insurance products, a term plan is one of the simplest forms of backup plans to provide financial security to your family. Moreover, as there is no investment feature attached to a term policy, the premium amount of term plans costs much lesser than other insurance products available in the market. So, on average, you need to pay only 1% of your annual income to get an insurance cover, which makes term plans a super affordable option. You can also avail of term insurance tax benefits by submitting a renewal premium receipt that verifies the premium you paid for a term policy and save a good percentage of your income.

Everything about term insurance premiums

A life insurance policy requires you to pay premiums to let your family claim the sum assured. While a lower premium can harvest significant savings for you, there are many factors that can affect your term plan cost and result in higher premiums too. Insurance providers consider numerous factors before pricing your policy. Some of these factors may not be within your control, but you can still get term insurance at a low cost by making some wise life choices.

Term insurance premium calculator

Here’s a formula that insurance companies use to calculate the premium amount you need to pay:

Premium amount = Premium rate x Cover amount chosen

As the underwriting department of the insurance organization computes your term insurance monthly premium rates, risk plays quite a significant role here and determines your probability of making a claim. Risk can be determined based on your age, medical history, nature of employment, etc. If the chances of raising a claim are lower in your case, then you shall have to pay a lower premium and vice versa.

Now, take a glance at the following factors that can affect your premium rate depending on the risk involved when you purchase a policy.

Factors that can affect term premiums

  • Age: The most obvious factor that affects your term insurance premium is your age. The younger you are, the lower is the mortality rate. Since the probability of contracting a life-threatening disease is low when you are young, you pay a lower premium to the insurer. Hence, it is advisable to get a term policy as early as possible.

  • Gender: According to statistical data, it has been found that women are less prone to diseases, such as heart attack, and thus have a longer lifespan than men. On average, a woman lives 5 years more than a man. Hence, she can avail of a life cover at a lower rate.

  • Policy duration: The duration of your policy also affects the premium rate levied on you. The longer the term of your policy, the larger is the sum assured. Hence, a short-term policy can be expensive than a long-term policy. However, there are many term plans that offer you the facility of premium payment at your convenience. If you do not want to take the pain of premium payment for years, you can also opt for a single premium term plan and pay the entire corpus in lump-sum instead of a quarter or annual basis. This reduces the risk factor to a great extent and lets you enjoy the returns through the tenure.

  • Health records and history: Your medical history plays a vital role to fetch you an insurance plan with adequate cover. If your family has a history of serious ailments, such as cancer, heart diseases, or others, you will have to pay a higher premium. Also, as insurers require your health records and medical examination reports before issuing a policy, if you are a patient of any serious illness, it might affect your premium rate basis the risk involved.

  • Smoking and drinking: Smoking and drinking are injurious to health and raise a red flag to insurers. So, if you are a smoker and/or indulge in alcohol, then you will end up paying a higher premium than other policyholders.

  • Obesity: Being obese often leads to many health problems, like cancer, osteoarthritis, high blood pressure, and more. Therefore, if you are suffering from obesity, term plans can cost you a little more.


Although you cannot do much about age and gender, you can definitely adopt a healthy lifestyle that can fetch you a better term insurance plan with returns that are adequate to meet your goals. By adopting good lifestyle choices, you can be hale and hearty even during old age and enjoy a term policy at affordable rates. Moreover, if you buy an insurance cover at a young age when you have no illnesses, you can save a decent amount of premium as there are higher chances of getting a long-term plan.

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