We all must have been on the receiving end of lots of advice when it comes to taking insurance, isn't it? Whether it's the cover amount or choice of insurance provider, we are told to act with prudence when taking any decision surrounding life insurance.?
However, when it comes to comparing the premiums charged by insurers, we fail to look beyond the basic comparison amongst various insurers. Besides the varying premiums of insurers, there are multiple other factors that impact your premium.?
Eager to know? Read on to understand some of the crucial parameters that affect your life insurance premium.
One of the most important criteria for calculating life insurance premium is your (policyholder¡¯s) age. Generally, youngsters are perceived to be less risky, and hence the policy¡¯s premium is cheaper when taken at an early age, like millennials in their 20s. Besides having a lower risk of health-related issues, young people are expected to opt for longer policy coverage and premium payment term, which in itself implies more revenue for insurers, hence, leading to cheaper premiums for young policyholders.
Given that insurance is all about risk, people suffering from health-related ailments or those having unhealthy lifestyle habits like smoking and drinking frequently will be required to pay a higher premium vis-a-vis those leaving a healthy lifestyle with no health-related major ailments. All this is primarily because the chances of making a claim are relatively higher amongst people leading an unhealthy lifestyle or suffering from some ailment.
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Yes, even your gender plays a role in the calculation of your life insurance premium. A female policyholder will be required to pay a lower premium vis-a-vis a male applicant, even if they have the same age, employment profile etc. The reason behind this is mainly that insurers perceive females usually to be less risky and tend to have higher life expectancy than males.
Policy term is the duration for which you wish to get covered. The longer your policy duration, the lower your premium is expected to be. This is because a long-term policy ensures a longer inflow of premiums for the insurance company, hence leading to charging a lower premium for longer coverage.
Those who work in high-risk industries such as mining, construction or shipping tend to be charged higher premium. The presence of a higher chance of claim due to a higher degree of risk in such industries, related to health and life, is what results in higher premium charged from such policyholders. Whereas those working in safer work profiles like office/desk jobs in the public or private sector are deemed to be at less risk of meeting with a mishap at the workplace, hence they are charged a relatively lower premium.
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Since many diseases like diabetes are considered hereditary, those who have the presence of such a history of hereditary diseases may be asked to pay a higher premium vis-a-vis those who don't have such a history.
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