A life insurance term plan is one of life insurance coverage's most essential and pocket-friendly protective shells. It pays a predetermined amount of money (Sum Assured) to the nominee of the insured individual in case of their demise during the policy term. 
 

As the name suggests, a term life insurance policy is valid for a specific term or duration. The predetermined period is known as the policy term. Typically no sum is paid if the policyholder survives the policy term. One must pay timely premiums to keep a term life insurance policy active. 
 

What Happens to the Premiums of the Term Life Insurance Plans?
 

The insurance company charges a specific cost for a particular term of life insurance policy in the form of premiums. The term life insurance premium is estimated based on certain factors, including the policyholder's income, age, health, and life expectancy. The insurer fixes a term insurance premium that needs to be paid throughout the policy term.
 

In addition, several insurance providers also offer policy renewal services. The policyholder can extend or renew the insurance if it is close to its maturity date. Renewal can increase the premium sum as it varies depending on health conditions and age. 
 

Timely payment of the term plan premium is an essential responsibility of the policyholder, and failing to do the same can cause the term life insurance policy to lapse. If one fails to pay the premiums, the nominee will not be entitled to receive the final coverage. Timely and regular premium payments ensure the validity of your term life insurance policy.
 

How Do Insurance Companies Make Money Using The Term Life Insurance Premiums?
 

The insurance companies collect the policyholder's insurance premiums and further save them into less-risk market securities. Such less -risk market securities include bonds, money market funds, or anything similar. During the claim settlement time, the insurance company withdraws funds from the saving income collection and transfers them to a cash account. Finally, the money is released to settle the payment at the time of claim settlement. 
 

The insurance company earns returns and interest on savings using the premiums the policyholders pay. Often the saving income can surpass the insurance claim costs. In such a scenario, the insurance company keeps the overhead income as profit. 
 

The procedure of collecting premiums by insurance companies is popularly known as Risk Pooling. 
 

What Factors Affect the Premium of Term Insurance Plans in India?
 

Multiple factors affect the premium amount for life insurance plans in India. Let us learn more about such elements in the section below:
 

• Age - The individual's age plays an essential role while calculating the premium sum for a term plan policy. The term life insurance premium increases with the policyholder's age. Insurance companies consider age a policy premium determining factor because the risk of contracting sickness rises with age. A young individual is less likely to fall sick than an older one. Also, younger ones shoulder fewer responsibilities in comparison to older individuals.
  
  When one sets out to buy a term insurance policy at a younger age, the premium to be paid is low. Therefore, your youth is the ideal time to save in term life insurance policies. 
  
  
• Medical History - If the health history of the policyholder is favourable, the calculated premium to be paid is low. If one possesses serious health ailments, the insurer calculates the risks and estimates the premium accordingly. The policy premiums for individuals with a medical history are generally higher. 
  
  
• Occupation - Occupation of the policyholder is one of the least considered factors but impacts the premium estimation. If the policyholder is involved in a risky occupation, the insurance company marks it as a risky candidate and estimates the premium accordingly. Such candidates generally pay more premium in comparison to people from safer job roles.  
  
  
• Lifestyle - The policyholder's lifestyle plays an essential role in calculating the policy premium. If the policyholder has a lifestyle that involves risk to life, the insurer considers them as risky investments. Hence, their policy premiums are more than others. On the contrary, insurance companies charge lesser premiums for people who lead a safe, secure, and risk-free life. 
  
  
• Premium payment tenure - With multiple-term insurance policies, you can avail of the facility to pick your preferred premium payment option. The most commonly followed premium payment mode is paying the premium regularly, where you can pay the insurance policy premium throughout the policy tenure.
  
  However, there are alternate methods available as well. You can pay up to a specific age and fulfil the premium payment early on. At the same time, the insurance policy continues to offer life coverage until the end of the policy tenure. Remember, the longer the premium payment tenure you choose, the smaller the premium sum. 

What is a Term Life Insurance Calculator, and How Can You Use it?
 

Term insurance calculator is a tool available online that helps compute the premium sum you require to pay for your selected life coverage and benefits. A term life insurance calculator comprises factors like age, income, health condition, gender, etc. 
 

Almost every term insurance provider company features a term life insurance calculator online on its portal. It helps compute how much premium one requires to pay to the insurance company in exchange for the chosen life insurance term plan.
 

The basic personal details required are as follows:
 

• Name
• Contact details 
• Date of birth 
• Gender 
• Pin code
• Email address
• Smoking status
   

With a few clicks, you can purchase the term life insurance policy of your choice. 
 

Conclusion
 

Everyone must plan early on to secure the lives of their loved ones and ensure a comfortable life for them after their demise. With the enthusiasm to work hard and fewer responsibilities, paying off the premiums early in life is more manageable. In addition, the policy premiums are also low and pocket-friendly if you plan on investing at an early age. Irrespective of what you choose, ensure to safeguard the lives of your dear ones while you still can.

L&C/Advt/2023/Jan/0027