Know the Factors Which Affect the Premium Rate of Term Insurance Policy

One of the best ways to secure the future of your loved ones financially is to have a term insurance plan. Moreover, in the long term, a lower premium can yield major savings. As purchasing a term insurance plan is very important it is equally important to understand how the term insurance policy premium is determined yearly. Regardless of what type of term insurance policy an individual wants to buy, it is important to know that the yearly premium of a term insurance plan depends upon the different aspects of the insurance buyers’ life.  

Here we have discussed the major factors that determine the premium rate of a term insurance policy.

1. Age

Age is the foremost and the most important factor that affects the term insurance premium of an individual. It’s a simple funda, if one buys a term insurance policy at a young age it involves low risk to the insurer as younger people are considered healthier and so the premium of the policy is also affordable. Whereas, an older person is more prone to health-related problems and tends to pose a high risk to the insurer, so the premium of the policy is also expensive. Therefore, it is best to have a term insurance policy at an early stage of life as possible. 

2. Gender

Apart from age, gender is also an important factor that affects the premium rate of the policy. As per the studies, the life expectancy of women is more than men. Moreover, according to statistics women require more medical attention than men. Therefore, based on these factors women are considered as low-risk individuals and so the term insurance policies provide premium rebates for female insurance buyers. However, they have to pay the premiums for a longer duration.

3. Self and Family Medical History

An individual’s medical history and his/her family medical history play an important role while determining the premium amount of a term insurance policy. The premium rate of a term insurance policy depends upon the condition of any current or past illness. The insurance company might charge a low premium if the insured proves that he/she is healthier and has recovered from any type of critical illness. However, the premium of a policy is also determined based on the insurance company and the type of plan one opts for. 

4. Marital Status

 Marital status plays an important part while processing the insurance application and determining the premium amount. The premium of a joint term insurance policy is higher as compared to the premium of regular term insurance. This is because; a joint term insurance policy provides coverage for the insured as well as the spouse. However, it is important to consider that a joint term insurance policy provides payout on the basis of the first death and no benefit is provided in case of death of the second partner. 

5. Dependents

The amount of coverage one requires also depends upon the number of dependents he/she has. If an individual has more dependents than the coverage of the policy also increases automatically and this results in a higher premium rate. 


 The premium of a term insurance plan also depends upon the occupation of an individual. For example, term insurance premium rates are higher for individuals who are into risky professions like soldiers, pilots, people working in oil, gas plants, and mining industry, or any other risky profession.

7. Income

 The income of an individual is checked by the insurance company to estimate whether the policyholder will be able to pay the premium of the policy on time. 

8. Debt

Any due debt including credit card bills, mortgages, loans, etc. is the key factor that defines the amount of coverage the insured is offered. 

9. International Travel

 If the insurance buyer is a frequent traveler and travels to places that are affected with high health risk, see a regular act of terror, or have a high crime rate then the person can be charged a high premium amount. 

10. Drinking and Smoking

If a  person is addicted to smoking or drinking then the premium rate of the policy also increases. The policy buyer with smoking habits are more prone to sickness or respiratory tract diseases thus it poses a high risk for the insurer.  Therefore, they need to pay a higher premium for the same coverage as compared to a non-smoker.

The Bottom Point!

These are the primary factors that determine the premium rate of the term insurance policy. Make sure you go through the fine lines of the policy to choose the best plan as per your requirement and suitability.


About Anil Baswal

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