A Beginner’s Guide to Life Insurance Premium

3-June-2021 |

If you have been browsing  the internet trying to find the perfect life insurance policy for you and your family, then you might have come across the term “premium”. Similarly, you might find life insurance premium varying not only from policy to policy but also from customer to customer. There are various factors that might affect the value of insurance premium. But before we get into the more technical side of things, let’s start with the basics.

What is a life insurance premium?


When an individual opts for an insurance policy, the insurer takes the responsibility of providing continuous support to the policyholder or nominee in case of unforeseen circumstances. In simple terms, the amount you pay the insurer to guarantee your and your family’s security is known as the insurance premium.

You may have already figured out that the amount for the premium varies massively in the insurance market. Some policies that provide high sum assured [higher death benefit] however, has zero investment component and are cheaper as compared to some policies which provide both death benefit and maturity benefit [due to investment/saving component] and requires higher saving commitment. It is usually considered prudent to go through a few policies and clear your understanding before you commit to one.


What are the factors affecting the value of life insurance premiums?



There are various insurance policies that provide protection from various uncertainties of life. There are yet others that will provide extremely specific benefits. But none of these factors is as crucial as the factors that are listed below:

  1. Age
  2. Medical records
  3. Gender
  4. Alcohol/Tobacco use
  5. Individual Policy

1. Age

Age is the main factor that is taken into account while deciding the premium for an individual. From the point of view of the insurance company, Young individuals are considered to be healthier, as they are likely to be least affected by ageing-related diseases and youngsters will continue their policy for a longer period of time (due to lower saving or premium commitment) in comparison to their geriatric peers. For this reason, young people are more likely to be considered assets rather than liabilities. Therefore, the sooner in your life you get the insurance, the higher are your chances of getting a lower premium rate and as you delay insurance buying decision, your premium rates will keep on increasing every year.

2. Medical records


Before the insurer approves the policy, they compulsorily ask the individual to provide them with a medical record. If you do not have a well maintained medical record, then you might be asked to undergo a thorough clinical check-up. What this does is provides insight into the lifestyle of the individual. Through the medical records, the insurers can anticipate the physical health of the individual and any potential illness that might affect their life. This also plays a key part in determining the premium rates.


3. Gender


There is very definite statistical evidence that purports that women live longer than men. The evidence states that, on average, women outlive men by five years.  Because of higher longevity women life insured have to pay a comparatively lower premium rate for their insurance policies as compared to male counterpart of same age.


4. Alcohol/Tobacco use


A factor that most individuals might overlook while considering the amount of life insurance premium that they have to pay is their smoking and drinking habits. Statistical evidence shows that smokers and heavy drinkers have a comparatively lower life span as their health might be affected by their lifestyle habits. Recent findings have even hinted at the possibility of smokers being at a higher risk of contracting the virus than their non-smoking counterparts. Hence, the insurance companies usually charge a higher premium to smokers and drinkers.


5. Individual Policy


The life insurance premium also varies from policy to policy. There are insurance policies that only provide death benefits as compared to comprehensive insurance that also cover the cost of medical treatment [due to accident or disease] or provide disability cover or provide maturity benefit along with other former benefits mentioned. Such policies will have comparatively higher premiums since they are covering more than one event/eventualities. Similarly, as the number of events covered by your premium increases, your premiums will also increase.


How to pay your life insurance premium?


Before the age of digital payments, most of the premium payments were usually made through cash or cheque. Nowadays, one does not have to bother with the payment system as there are multiple channels available to the individual.

  • Card payment: You can simply enter your debit or credit card information online while making your first insurance premium payment, then the insurer will send your payment request whenever the premium is due. You can also set auto-payment; this will automatically pay your premium on the date that it is due.


  • Net banking: Another way to do it is through online net banking. After you have submitted your details to the insurer, they will provide you with their payment details. Now, every month when the amount becomes due, you simply have to enter their details on the NEFT portal to make your insurance premium payment. You can also setup Standing Instruction to ensure auto-payment of your premiums on the due date.


  • UPI: Another method of life insurance premium online payment is via UPI. Nowadays, insurance companies will send you a message when the premium becomes due. In that message, they include the UPI option. You only have to click on the link to approve the payment. But to enable the UPI payment option are required to have a UPI app like Google Pay, BHIM, PhonePe, etc.


Tata AIA Life Insurance Plans


Tata AIA Life Insurance Company provides a range of premium calculators which you can use to get an approximate cost of life insurance premiums. The Tata AIA term insurance plans provide extensive coverage at a comparatively lower premium price. Their savings solutions and ULIPs offer good returns on investment along with a predetermined life cover. Further you can increase your cover or benefits by adding comprehensive health and protection rider1 by paying nominal charges. You can also browse through the retirement and group life solutions. You can check out a variety of life insurance policies, use the calculator to determine the premium and payout and choose the life insurance plan that matches your coverage needs as well as budget.


Final Words


A life insurance premium is the cost of the insurance policy that you buy, and more often, it is a recurring cost. Therefore, ensure to determine your exact premium outflow before you buy the plan. However, the cost of premium should not be the sole criterion to choose a policy. Check the features and coverage of the plan and the reliability of the insurance company. In the end, go for a life insurance policy that offers the most value for the premium cost.


For more details, you can get in touch with our insurance advisors today!


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