A life insurance policy is a must-have for every individual to ensure the financial security of the family and loved ones. However, to purchase the most comprehensive plan, it is important to keep in mind the various aspects of it. One of the most important aspects of a life insurance policy is the premium rate. Further in this article, we have elaborately discussed the life insurance premium and how it is determined.
What is Life Insurance Premium?
A life insurance policy is an agreement between the insurer and the policyholder wherein the policyholder receives the insurance coverage as a sum assured in return for the premium paid towards the policy.
Age:
This is one of the most important factors considered by the insurance companies while calculating the premium rate of the policy. An insurance buyer is perceived to be at a lower risk, health-wise when they are young, thus for younger policy buyers, the cost of the life insurance policy is also low.
Health Conditions:
People suffering from pre-existing illnesses pose a high risk for the insurance company, therefore, they need to pay a higher premium as compared to the individuals who are healthy.
Gender:
This is another factor that determines the premium rate of the life insurance policy. The female policy buyers are required to pay a lower premium as compared to male policy buyers. This is because men are perceived to be at higher risk and have a low life expectancy.
Lifestyle Habit:
People who are addicted to smoking and drinking have high chances of developing critical illnesses like lung diseases, cancer, etc. Therefore, if an individual falls under this category, then they will be required to pay a higher life insurance premium.
Occupation:
If an individual is employed in a high-risk industry like mining, construction, etc. then they will be charged a higher premium.
Medical History:
This is another major factor that impacts the life insurance premium rate. The insurance companies ask for medical records before issuing the policy. In case a policy buyer has a history of medical conditions such as heart disease, diabetes, etc.,
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