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A term insurance plan is the most straightforward and popular way of ensuring the family’s financial security in the unfortunate event of the death of the earning member of the family. If you are planning to buy a term insurance plan to safeguard your loved ones against financial insecurity, term plan premium is one of the most important factors to consider.
The term insurance premium decides the cost of the policy for you. Therefore, it is essential to know what factors of term insurance affect the premium.
What is Term Insurance
Before understanding the factors that affect term insurance premiums, let us briefly understand what a term insurance policy is.
A term insurance policy provides life coverage for a specific period to the policyholder. It provides a sum assured to the policyholder’s beneficiary if the policyholder passes away during the policy term.
You can get high coverage for a low premium under a term insurance plan. This is the most basic and uncomplicated life insurance plan.
Financial experts suggest adding a term insurance plan to your investment portfolio at a young age to get extensive life coverage.
What is Term Insurance Premium
A term insurance premium is an amount you pay the insurer to get a term insurance plan with all its benefits and features. The insurer decides the premium at the time of offering the policy. The term insurance premium increases based on several factors.
How can i Pay my Term Insurance Premium
You can choose between multiple options to pay your term insurance premium. These are:
Autopay or E-Mandate: Automatic transfer of premium amount on the due date.
Scan and Pay: Scan the QR code on Paytm, JioMoney, Razorpay app to open the website payment page and enter policy details to make payment.
Digital Payments: Pay through Visa, Master Card, Debit Card, etc.
Mobile Wallets: Premium payment through mobile wallets, like Google Pay and PhonePe.
E-Banking Tie-Ups: Payment premium through various banks.
Bharat Bill Payment Systems: Internet Banking, Mobile Banking, UPI, etc.
Service Centres: AP Online, COmmon Service Centres, and Suvidhaa.
UPI: Select UPI and enter UPI ID to verify. Log-in to your UPI account, go to pending requests, and approve to make payment.
Interbank Mobile Payment Service (IMPS): Instant payment through a bank account using your mobile number and the Mobile Money Identifier Number.
Factors behind Term Life Insurance Increasing Premium
As stated above, several factors affect the term insurance policy premium. Knowing these factors can help you reduce the policy premium, as several of these factors are manageable. Lower policy premiums make the policy cheaper for you.
Here are the top factors that affect the term plan premium:
The customer’s age: The policyholder’s age is the most critical factor that affects the term insurance premium and can lead to a significant increase in the premium. A term life insurance policy’s premium increases with the policyholder’s age.
The main reason behind this is that age directly affects a person’s health condition and life expectancy. An individual is less likely to fall ill or pass away in his younger years than in later life stages. As age progresses, chances of age-related diseases and death increase.
Note that the qualifying medical exams also become stricter with an increase in the customer’s age. Therefore, buying a term insurance policy when you are still young is better to enjoy higher benefits for a lower premium and lenient qualifying medical tests.
Prevailing health conditions: Your prevailing health condition is significant to the insurance provider. The underwriting process for most insurers includes a medical examination of the customer. This examination studies and records several of the customer’s vital metrics.
The insurer uses this information to decide the insurance policy’s premium. The premium is higher for people with an illness. Some insurance providers also offer a ‘no exam’ term insurance policy. However, the premium of such a policy is much higher.
The customer’s gender: The customer’s gender also affects the insurance policy premium. In India, the average life expectancy of women is higher than men. It means there is a higher possibility for a woman policyholder to continue with the policy for a longer duration than a male policyholder.
Therefore, female policyholders can get a term insurance plan for a lower premium than male policyholders, with other conditions remaining the same.
Smoking habits: Smoking poses a higher health risk and may lead to several diseases, such as lung cancer and heart ailments. Therefore, it is perceived as a risk by insurance companies. People who smoke occasionally may also be classified as smokers by insurance providers for evaluation.
As a general practice, smokers have to pay a higher premium than non-smokers for term life insurance. However, lying about your smoking habit is not a good idea, as the insurance company can cancel your policy if they find out about it later. If you have been a smoker in the past but have given up the habit now, you can ask your insurer if it will still affect your insurance policy premiums.
The customer’s occupation: What you do for a living may define your health conditions. Your profession may require you to perform life-threatening tasks regularly. For example, a firefighter, a mine worker, or a pilot may have a higher risk than a teacher or a banker. People working in such life-threatening conditions usually have to pay a higher premium on their term insurance policy.
General lifestyle: The insurance provider studies your habits to decide your insurance policy premium. People who lead a risky life and have hobbies like racing or rock climbing have to pay a higher insurance premium than others. Additionally, people who regularly consume alcohol are more likely to suffer from liver disease than a teetotaler. In all such cases, the term insurance premium increases.
The desired sum assured: The sum assured you choose directly affects the insurance plan premium. If you expect a higher coverage amount to secure your family better, you will have to pay a higher premium. When deciding the sum assured, It is best to consider your coverage requirements, total income, and current liabilities.
How to Reduce Term Insurance Premium
Use the following tips to reduce your term insurance policy premium:
Get a term plan at a young age: Usually, people think of a line insurance policy after crossing a certain age. As age is the most crucial factor that decides a term plan’s premium, try buying a term insurance policy when you are young.
Opt for a longer policy tenure: Selecting a longer policy tenure will reduce the premium you pay annually for your term insurance plan.
Choose the riders# wisely: You can add riders# to your term insurance plan to increase its benefits. There are additional costs associated with these riders#. Therefore, only opt for riders# that match your requirements.
Tata AIA life insurance company offers several term insurance plans with multiple benefits and features, like tax* benefits, multiple coverage and payment options, and low premiums.
Our specially designed traditional riders#, like the Tata AIA Vitality Protect and Tata AIA Vitality Health multiply the benefits of your term insurance plan for minimal additional cost.
Use our online calculator to know the premium for a term insurance policy of your choice for a desired sum assured.
Conclusion
A term life insurance plan provides extensive coverage for a low premium. A premium is the amount you pay to the insurance company to get the term insurance policy coverage. Several factors, like age, gender, occupation, lifestyle, health conditions, etc., contribute to the term insurance premium. You can manage most of these factors to reduce the term insurance premium.
