Life cover provides financial protection to your family in case of contingencies. Insurers consider many factors before deciding a premium for you. While some factors are within your control, some aren’t. By prudently making your choices, you could get more value for your money.
Following are the factors that could lower or increase your insurance premium amount:
If you latch on to an insurance policy early in life, you lock-in at lower premium rates. That’s because, with higher age, the chances of a claim (due to death) also increase. Accordingly, the insurer increases the premium rates.
For instance, a 30-year-old male pays an annual premium of Rs 10,648 for a life cover of Rs 1 crore for another 30 years. And for a 35-year it increases to Rs 14,466 or 36 per cent more (for a similar tenure) as per the latest online quote of a leading life insurer. So, consider buying a term cover as soon as you start taking financial responsibility.
Indian women are charged a lower premium than men, thanks to their higher life expectancy. With a greater likelihood of surviving the policy years, women are offered a lower premium. Taking the above example, a 30-year old female would get a similar policy at an annual premium of Rs 9,418 or 12 per cent lesser.
3. Policy period and sum assured
Longer the policy period, higher is the probability of claims and hence you pay a higher premium. Life insurers today are offering life cover till 85 years. However, use your discretion and choose a term that terminates with your retirement and a sum assured that adequately protects your family. In the above example, you might have to pay 18 per cent more for extending your cover by ten more years.
4. Smoking, drinking habits
If you light up, it’s a red flag from the insurer. A smoker pays a whopping 51 per cent more as premium than a non-smoker. Similarly, if you drink too much, the insurer might charge you more. It’s important you honestly disclose these facts.
5. Health disclosures
It’s also important you make the correct health disclosures to avoid losing claims. Personal medical history of diabetes or chronic kidney disease might not necessarily increase your premium, but a heart-related ailment or surgery can lead to rejection of a policy. Height and weight details, in turn, tell whether you are obese or not.
Sometimes the insurer might ask you to go through a medical test if you seek a high sum assured or if they want to verify your health status.
^Based on latest online quotes of a leading life insurer
* Personal accident cover of Rs 2 crore
6. Your occupation
Some work by nature is riskier (say working in mines or fire fighting department) and increases the chances of death. Insurers, therefore, might charge a higher premium. Ensure you make proper disclosures about your occupation including that of your income. That’s because insurers usually limit the sum insured as a multiple of your current income.
7. Payment schedule or method
Monthly payments of premiums are costlier (five per cent in the above example) as compared to paying in a lump sum once in a year.
Moreover, the premium will be much higher if you opt for limited premium options. Unless you have lumpy income streams, you are better off with paying regular premiums.
Also, you can save (at least five per cent) by buying policies online and directly from the insurer instead of a life insurance advisor. This is because the insurer saves on administration and broker commissions which are shared with you in the form of lower premiums.
8. Additional riders
If you opt for additional riders such as for critical illness or accidental death cover, you pay an additional premium. Taking the above example, if you add a rider of personal accident cover worth Rs 2 crore to the policy, your premium would increase by 55 per cent. While choosing such riders, ensure there is no overlap and you actually need them.
Some factors that affect your term premiums are within your control. By adopting a healthy lifestyle and by making full medical disclosures, you stand to gain. And by making prudent choices - sans any frills, you could get the best bang for your buck.