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Term Insurance 360 views February 7, 2019
It is a common tendency to discuss premium rates that one would need to pay for term insurance bought online or offline. This is because through a term insurance plan makes up for the loss of income, resulting from the death of a loved one, in the long run, the premiums paid regularly during the policy period are viewed as necessary expenses. Most people do not know how to use the term plan premium calculator and, hence, rely upon premium rates quoted by the company while filling in details of the term plan proposal.
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It is important to realize the various factors that life insurance companies consider before deciding on the premium amount their policyholders will have to pay to avail benefits of basic plans like a term insurance policy. Realizing many of these factors and their direct bearing on premium rates can help lower premium payment during the purchase of life insurance policies like term insurance. While the impact of certain factors has a lot to do with our lifestyle, there are others that are not within our control. A close look at the term insurance calculator reveals how premium calculation involves taking into consideration all such necessary factors.
The factors that have a lot to do with our habits and nature of lifestyle include:-
Do you smoke or drink? If yes, do you drink in excess or in moderation? How many cigarettes do you smoke in a day? Are you a compulsive drinker or smoker? Have you sought any intervention before to control your urge to drink or smoke? Questions like these may infuriate you, but there is no escape from them as your habits have a direct impact on your health and, consequently, estimated lifespan. Also referred to as “mortality risk”, insurance companies look at mortality tables that enable them to make informed assumptions about the length of their policyholders’ lives. Insurers either tend to avoid insuring lives of heavy smokers or drinkers or charge extra premiums to assuage the risk that they may suffer owing to policyholders dying within the stipulated policy period. This means that smokers or alcohol drinkers would have to pay more premium than non-smokers or teetotalers.
The kind of job one does or occupation he or she may be involved with is an important deciding factor of mortality risk. People employed with the armed forces, firefighters, deep sea divers or bomb demolition squad face higher quantum of risks to their everyday lives and, hence, have to pay more premiums than those with regular office jobs.
Whether you enjoy good health or are afflicted with life-threatening illnesses have a lot to do with the amount of premium your insurer would ask you to pay. Health is a major determinant of mortality risk has a direct bearing on your insurance premium. Those suffering from diabetes or high blood pressure are at a greater risk of succumbing to their illnesses, thus, posing a risk to the insurers as they have to deal with the increasing number of insurance claims. Greater risk of death means more payments of death benefits or sum assured to the nominees of the policyholders in the event of the latter’s death during the policy period.
Almost every insurer offers a choice of premium payment. Be it a one-time payment, yearly, half-yearly, quarterly or monthly, the amount of premium you have to pay has a lot to do with your choice of premium payment option. Those willing to pay their premiums annually have to pay a lot lesser than those to opt for the monthly payments. This is because of the lower administrative costs that accompany annual premium payments versus the administrative costs corresponding to monthly payment options.
Term insurance protects against death, disability and disease. To tackle these problems, term insurance companies allow the scope of additional riders in return for added premium payments. However, before availing the benefits of these riders, it is necessary to understand if you need them in the first place. More so, if you have bought health insurance or accident insurance to cover the expenses that may incur in future, you do not need to load your term policy with such additional rider options. Avoid riders if you do not need them, and your amount of premiums will automatically decrease.
The pervasiveness of the internet has changed the way people make their purchases these days. This is true of insurance policies that are now largely being bought online for the sake of convenience. However, paying for insurance online also costs lesser than the offline mode as insurers are able to save on agent commissions, distribution, and administrative costs, thus, discounting the insurance costs which they pass on to their customers.
It is true that a long policy period provides effective coverage than shorter duration. However, the policy tenure also affects premium costs as a longer policy period begets higher premium payment. A policy period extending for 30 years means that the policy will be covering the life of the insured for the next 30 years in contrast to those who may have opted for a shorter policy period, viz., a 15-year policy period, thus, prompting higher premium payments.
A greater amount of sum assured means higher risk on the part of the insurance company if the policyholder dies during the policy period. Lower risk of the insurer accompanies a lower amount of sum assured. If you believe that the premiums charged are beyond your paying capacity, you may choose to lower any of these two factors to arrive at a premium rate that you would be willing to pay.
In addition to the aforementioned factors, there are other considerations that come into play while deciding the premium rates. Some of these factors are:-
Mortality risk increases with age, which means that any life insurance policy including term insurance, when bought at a later stage of your life, costs more than policies bought when young. While young people are less prone to illnesses or devastating health disorders, those at an advanced stage of life are more likely to complain of sickness or recurring diseases. While proposing any insurance plan including term insurance policy, insurers inquire about the age of their prospective customers.
The concept of gender equality takes a back seat while buying any kind of insurance policy including a term insurance plan. However amusing it may seem, insurers charge a lower premium from their female policyholders than their male counterparts. This practice is based on findings of statistical studies that indicate females outnumbering men in lifespan, thus, lessening the chances of age-related mortality risk, and hence, lower premium payments.
Hereditary problems come into play while deciding premium rates. This is because genetic problems like diabetes, cardiovascular diseases, and others take a long time to be treated and, in most cases, are completely untreatable, thus, posing a risk to lives of the policyholders concerned and consequently increase in term policy premiums. It is important that policyholders disclose all facts concerning their medical history that are relevant to the risk for which they are seeking cover.
It is possible to make a lower premium payment on life insurance policies by controlling food habits, adopting necessary changes in lifestyle, making online payments and opting for an adequate term insurance policy cover. Controlling factors that are within the ambit of your influence can save you a lot on premium payments while availing necessary life cover.
Must Read:- HDFC Life Insurance Company Plans in India
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