Calculating life insurance premium is more convenient than you might realise. One way to do it is by using life insurance premium calculator that takes certain details from the prospective policyholder to come up with a number. Another method is more technical, known as the underwriting process carried out by the team of underwriters who use statistics to calculate the premium. Both the methods, be it underwriters, or, a life insurance calculator analyse details like age, health, lifestyle habits, employment details, etc. in determining the premium amount.
In this article, we will talk about all the factors that a life insurance premium calculator takes into account when calculating your premium. Here are some of those factors.
Table of Contents
1. Family Medical History
Medical history of your family will play a huge role in calculating your premium amount. You would be required to enter these details in a life insurance premium calculator for it to calculate the premium accurately. Do not withhold information from your insurer to save money on premium.
Doing so can jeopardise the death benefit that you intended to leave for your family. If you have a family history of heart diseases, cancer, or a stroke, be sure to mention it when buying a policy. This will increase your premium but at least your policy benefit will be secure and guaranteed.
2. Smoking And Drinking
If you smoke or drink, it can cause a serious setback to your health and increase the risk of lifestyle diseases. Therefore, an insurance provider will charge you premium at least two to three times higher if you have such lifestyle habits.
3. Your Own Medical History
Insurers take your past health history into account when determining your premium amount. It can affect your decision to choose from different types of life insurance available in the market today. A healthy person who has not been diagnosed with a chronic illness or a health issue will pay low premium.
4. Medical Tests
You must undergo basic medical tests to ensure that you are healthy and do not have any pre-existing medical conditions that can put your death benefit at risk. When you use a life insurance calculator, you are expected to enter your health-related details accurately for it to calculate the correct the premium. If you are medically fit, the insurer will charge you a low premium.
5. Policy Duration
When you buy a term insurance policy, be sure to choose the longest tenure as it has the direct bearing on your premium amount. When your policy duration is longer, it is less expensive and more affordable. It is also significantly cheaper than a whole life insurance policy that covers you for your entire life, as opposed to a specific tenure offered by a term insurance plan.
6. Mode of Purchase
When you buy policy online, you can get it cheaper as you eliminate the administrative costs. You can also use the life insurance premium calculator to accurately calculate the premium. Just select the sum assured and policy duration, among other things, to make the final purchase.
7. Mode of Payment
Payment method that you choose to purchase your life insurance too can have an impact on your premium. There are four ways to pay for it – monthly, quarterly, half-yearly, or annually.
If you choose to pay monthly or quarterly, the premium will be higher due to increased administrative costs for the insurance provider. To keep the premiums low, consider using annual payments as a payment method.
This is the first factor that a life insurance provider considers when deciding your premium. A person at a young age is considered a low risk and offered low premiums as they are less likely to get life-threatening diseases.
A young person will also have more working years ahead of them as compared to an older person, thereby reducing their premium. Therefore, your premium amount will be low if you buy a policy at a young age.
According to studies, women live more than men by at least four years. As a result, the insurance premium for men is usually higher than it is for men. So, if you are a young woman who wants to invest in a life insurance policy, your premium is likely to be lower. You can use a life insurance premium calculator to note the difference between premiums for men vs women.
10. Health Issues
A person who is obese or overweight is at an increased risk of certain illnesses, such as blood pressure, heart problem, diabetes, etc. Therefore, their premium will be higher.
All these factors can influence your premium amount. That is why it is advisable to check multiple reliable insurance provider websites, such as Max Life Insurance, to compare policies and make an informed buying decision. Don’t forget to assess the insurer’s reputation, claim settlement ratio, and other such factors before investing in them for long-term.