Companies selling life insurance policies take into account various factors to arrive at a price i.e. the premium charged for your life insurance policy. Some of these factors are within your control while others are not. By controlling the factors that are within your ability to influence, you can try to become a relatively risk free investment for a life insurance company so that it charges you lower premium.
Here are the main factors that you can control to some extent.
1. Drinking in excess and/or smoking tobacco. Both these bad habits negatively impact your health and consequently increase your mortality risk. This is the reason why insurance companies ask about these habits before fixing the premium chargeable for your policy. If you smoke, you would pay much more premium for a life insurance policy than if you were a non-smoker. Also, if you drink too much the insurer will charge more to insure you.
2. Your occupation. If the type of job you do is a risky one such as deep sea diving, fire fighting, bomb demolition etc then your insurance premium is likely to be much higher than if you work is a regular office job. In fact, in some cases insurers may not be willing to insure you at all. Obviously, a dangerous profession ups your mortality risk substantially as compared to people who have regular office jobs.
3. Your health. Your state of health is a major factor determining your mortality risk and therefore your life insurance premium. Obviously, someone suffering from diabetes and high blood pressure is more at risk of passing away early than a person without any such health issues. Most insurers ask about your health status when issuing a policy because this is a premium-determinant. Further, majority of insurers insist that the policy applicant get a medical examination/test done in cases where the applicant's age is above a certain limit. Some may require this even for young applicants. Medical examination would also be required if a very high cover is asked for irrespective of the age of the policy applicant.
4. Tenure and value of policy. The longer the policy tenure and the larger the life cover being bought, the higher the premium will be. A 20-year policy tenure means that the insurance company will be covering the risk of your dying for a longer period. A higher cover or sum assured under the policy means that the company runs a higher risk in case of your death during the policy. If you find that the premium being quoted for your policy is too high then you can reduce one of these factors to lower the premium payable.
5. Obesity. Obesity i.e. being overweight beyond a certain level often leads to a number of diseases such as diabetes etc. This is likely to result in the insurance company raising your insurance premium.
6. Premium payment mode. Generally insurers offer you a choice of frequency of premium payment - single one-time payment, annual, bi-annual, quarterly and monthly. Your total premium outgo is likely to be less if you choose the single or annual payment options as compared to say the monthly option. The company not only saves on administrative costs with annual premium but also gets the money in advance for the full year, vis a vis the monthly payment option, which translates into a lower total outgo for you.
7. Riders increase premium. Riders are additional benefits on policies which can be bought for extra premium. Obviously these increase the policy cost. Therefore, carefully evaluate the need for a rider before deciding to buy it.
8. Purchasing online or offline. Premium charged for policies bought online tends to be less than what you would pay for the same policy bought offline via an agent or other intermediary. This is because online sales help insurance companies cut down on agent commissions, distribution and administrative costs. Purchasing online or offline depends on how much of customised advice you need in choosing a suitable policy.
Factors, which affect the level of your insurance premium but are beyond your control include:
1. Your age. The older you are when you buy a term life insurance policy the higher the premium. This is because the chance of dying or mortality risk increases with age. By and large, younger people are healthier but the probability of their health deteriorating increases as they get older. This is why your age is one of the first questions asked by an insurance company when calculating your premium.
2. Your gender. This also one of the main determinants of your policy premium. As per statistical studies women generally tend to live longer than men. This obviously impacts the female gender's age-related mortality risk. Therefore, other things being equal, a woman is likely to be charged lower premium than a man of the same age for the same policy.
3. Genetic factors. Being genetically susceptible to certain diseases such as diabetes, heart problems etc is also likely to push up your life insurance premium. Insurers ask questions about your family's medical history in order to see if such negative hereditary factors exist.
How much each factor affects your premium depends on the rating and underwriting method of each insurer. Therefore it is always advisable to compare premium quotes from different insurance companies. However, you should also compare the companies on parameters such as policy coverage, reputation, customer service record, claims settlement ratio etc and not base your decision on premium rate alone.
Here are the main factors that you can control to some extent.
1. Drinking in excess and/or smoking tobacco. Both these bad habits negatively impact your health and consequently increase your mortality risk. This is the reason why insurance companies ask about these habits before fixing the premium chargeable for your policy. If you smoke, you would pay much more premium for a life insurance policy than if you were a non-smoker. Also, if you drink too much the insurer will charge more to insure you.
2. Your occupation. If the type of job you do is a risky one such as deep sea diving, fire fighting, bomb demolition etc then your insurance premium is likely to be much higher than if you work is a regular office job. In fact, in some cases insurers may not be willing to insure you at all. Obviously, a dangerous profession ups your mortality risk substantially as compared to people who have regular office jobs.
3. Your health. Your state of health is a major factor determining your mortality risk and therefore your life insurance premium. Obviously, someone suffering from diabetes and high blood pressure is more at risk of passing away early than a person without any such health issues. Most insurers ask about your health status when issuing a policy because this is a premium-determinant. Further, majority of insurers insist that the policy applicant get a medical examination/test done in cases where the applicant's age is above a certain limit. Some may require this even for young applicants. Medical examination would also be required if a very high cover is asked for irrespective of the age of the policy applicant.
4. Tenure and value of policy. The longer the policy tenure and the larger the life cover being bought, the higher the premium will be. A 20-year policy tenure means that the insurance company will be covering the risk of your dying for a longer period. A higher cover or sum assured under the policy means that the company runs a higher risk in case of your death during the policy. If you find that the premium being quoted for your policy is too high then you can reduce one of these factors to lower the premium payable.
5. Obesity. Obesity i.e. being overweight beyond a certain level often leads to a number of diseases such as diabetes etc. This is likely to result in the insurance company raising your insurance premium.
6. Premium payment mode. Generally insurers offer you a choice of frequency of premium payment - single one-time payment, annual, bi-annual, quarterly and monthly. Your total premium outgo is likely to be less if you choose the single or annual payment options as compared to say the monthly option. The company not only saves on administrative costs with annual premium but also gets the money in advance for the full year, vis a vis the monthly payment option, which translates into a lower total outgo for you.
7. Riders increase premium. Riders are additional benefits on policies which can be bought for extra premium. Obviously these increase the policy cost. Therefore, carefully evaluate the need for a rider before deciding to buy it.
8. Purchasing online or offline. Premium charged for policies bought online tends to be less than what you would pay for the same policy bought offline via an agent or other intermediary. This is because online sales help insurance companies cut down on agent commissions, distribution and administrative costs. Purchasing online or offline depends on how much of customised advice you need in choosing a suitable policy.
Factors, which affect the level of your insurance premium but are beyond your control include:
1. Your age. The older you are when you buy a term life insurance policy the higher the premium. This is because the chance of dying or mortality risk increases with age. By and large, younger people are healthier but the probability of their health deteriorating increases as they get older. This is why your age is one of the first questions asked by an insurance company when calculating your premium.
2. Your gender. This also one of the main determinants of your policy premium. As per statistical studies women generally tend to live longer than men. This obviously impacts the female gender's age-related mortality risk. Therefore, other things being equal, a woman is likely to be charged lower premium than a man of the same age for the same policy.
3. Genetic factors. Being genetically susceptible to certain diseases such as diabetes, heart problems etc is also likely to push up your life insurance premium. Insurers ask questions about your family's medical history in order to see if such negative hereditary factors exist.
How much each factor affects your premium depends on the rating and underwriting method of each insurer. Therefore it is always advisable to compare premium quotes from different insurance companies. However, you should also compare the companies on parameters such as policy coverage, reputation, customer service record, claims settlement ratio etc and not base your decision on premium rate alone.
Source:-The Economic Times
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