Factors influencing life insurance premium
Life insurance premium can be calculated using the life insurance premium calculator , but do you know the factors that influence the life insurance premium? The factors influencing the life insurance premium are:-
- Age of the prospect:
Life insurance premium primarily depends on the age of the prospect. The last birthday of the prospect is taken into consideration while calculating the life insurance premium. It is important to note that the premium changes with each passing year as the risk of mortality increases. It is well known that the mortality rate is higher in the elders when compared to the youngsters; this is due to the older people contracting diseases and heavily prone to illness. The resistance power among the old people is less compared to the young people.
Higher Age = Higher premium
Life insurance premium increases with increase in age of the prospect due to the high mortality ratio which can be observed to increase as the age increases. The life insurance calculator takes the mortality ratio into consideration while calculating the life insurance premium. Higher the mortality ratio, higher would be the premium charged by the insurance company. Hence, it is advisable to take life insurance policy at a very young age to reduce the premium at old age as the life insurance premium calculator throws high premium at old age.
Gender determines the life insurance premium to be paid by the customer. It can be noted that the premium for Women would be considerably lower than that of Men. This is due to the fact that women are more likely to live on an average 5 years more than men which means that the mortality ratio for the same period would be less in women. This results in the fewer life insurance premiums to be paid by the women when compared to men. If we calculate the premium of men and women with all the other factors remaining constant, the premium of women would be at least 10-15% less than that of men’s.
But it is important to note that most of the deaths occur in women at the time of pregnancy and the insurance companies would not be willing to insure a carrying woman. Due to the complication arising out at the time of delivery or during pregnancy, there are high chances that the mortality ratio can increase in women. With the advent of technology the number of deaths during pregnancy has been reduced drastically, but the insurance companies are still sceptical when it comes to insuring a pregnant woman.
- Health History:
Health history of the prospect also plays an important role in deciding the premium to be charged by the insurance company. Life insurance calculator takes into account of the health history of the prospect and decides on the acceptance of the proposal. Every insurance proposal requires the health history of the prospect to be taken into consideration before deciding on the acceptance of the proposal. Life insurance underwriting process involves getting adequate information from prospect regarding the health history such as pre existing diseases, if the prospect has undergone any treatments or operations, any hereditary diseases etc.
All these factors are considered by the underwriting team of the life insurance company before deciding the life insurance premium. The life insurance premium calculator displays the premium if there are no pre existing conditions or adverse health history. All the other cases with adverse health history and pre existing conditions will be examined by the underwriter team to decide on the acceptance of the proposal.
Obesity and underweight are the two factors which affect the life insurance premium to be paid by the customer. Being obese can lead to a number of health problems such as Heart attack, diabetes, High BP etc which increase the mortality ratio. Underweight can also lead to contracting many diseases such as Malnutrition, Anaemia and vitamin deficiency disease etc.
- Sum Assured:
Sum assured is the maximum liability of the insurance company in case of death of the policyholder or maturity of the life insurance policy. The sum assured is paid to the nominee or legal heir in case of death of the policyholder. Sum assured can be increased or decreased by the customer on the online portal as per the Life Insurance calculator of each insurance company.
Most of the insurance companies offer sum assured 15-20 times your annual income and this can be calculated using the online calculators available. Any sum assured above this limit needs to be justified to the underwriting team of the life insurance company and the underwriter will decide on this. The life insurance premium calculator increases the premium if the sum assured is increased and decreases the premium when the sum assured is decreased. The increase in premium is due to the extra risk that needs to be taken by the insurance company which comes with increased premium.
The premium in the life insurance calculator increases if your life style is risky i.e. smoking, drinking or consuming tobacco. The life insurance premium calculator is designed to increase the premium or refer your proposal to underwriter in case you have smoking or drinking habits which are considered as risky elements in the life insurance underwriting process. The chance of death happening is high in case of people smoking or drinking or consuming alcohol, this increases the mortality ratio where people have these habits.
Consuming tobacco and drinking liquor can cause various diseases such as Cancer, Heart attack, Diabetes etc which increases the chance of death in the prospect. Hence the life insurance premiums for these categories are on the higher side when compared to people without these habits. In general insurance companies accept proposals from people who are occasional drinkers and smokers and the proposal is verified by the underwriters before accepting the risk.
- Hobbies / Occupation:
The occupation of the prospect also decides the life insurance premium to be paid. For the purpose of insurance some occupations such as Persons working in Chemical, Fire Crackers, Army and police etc. services are classified as Hazardous and pose a high level of risk for the insurance companies in terms of death claims. These occupations have higher mortality rate and thereby higher life insurance premium.
Life insurance proposals of people engaged in these occupancies would be referred to underwriters and the final decision would be taken by the underwriter after taking all the risk factors into consideration. The risk involved in a desk job is less than that of a marketing job and the premium is calculated according to the occupation of the prospect.
Hobbies such as Scuba diving, Paragliding also attract special attention of the underwriters as there is high mortality ratio in people having these hobbies. The life insurance premium calculator determines the premium of the prospect after considering the hobbies and occupation of the prospect.
- Type of Policy:
Lastly but most importantly, the major factor which determines your life insurance premium using the life insurance premium calculator is the type of life insurance policy opted by you. There are many types of life insurance policies such as Term insurance, Endowment insurance, Annuity insurance, Money back insurance etc. All these types of life insurance policies have different premiums but all of them cover the life of the insured.
Also there are many insurance companies in the market offering life insurance policies which have different premiums. The premium of the company depends on the service levels also; better the service, higher the premium. It is advisable to opt for the life insurance company which provides better service and extensive coverage at the most affordable premiums.
- Family Health History:
Lastly but most importantly the family history of the applicant would also be considered before deciding the life insurance premium using the life insurance premium calculator. There are many diseases which would be passed to their offspring and are called as hereditary diseases. Some of the common hereditary diseases include Sickle cell disease, Haemophilia, Huntington’s disease etc. which can be passed from the parents to their children.
Underwriters consider these hereditary diseases at the time of deciding the life insurance premium to be paid by the applicant. There are cases where the underwriters have declined the proposals having hereditary diseases. So, the hereditary disease also plays an important role in deciding the life insurance premium using the life insurance premium calculator.
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