10 Factors which affect your life insurance premium

Factors which affect your life insurance premiumFactors which affect your life insurance premium

When you plan to buy a life insurance or term insurance plan, you would see differentiation in premiums being charged. These premiums on life insurance are influenced by many factors based like smoking, age,  premium payment method, etc. What are the major factors which affect your life insurance premium. Which are the factors where you can control and pay lower premiums for term insurance plan?

What is life insurance plan?

If you are familiar with this definition, you can skip this section.

Life insurance plan is one where the risk coverage is borne by the insurance company for a premium payable by the insured and in case of death of the insured, insurance company would pay the sum assured.

While offering life insurance policies, the companies take into account many considerations to reach at the premium. That premium is the cost charged by the insurance company against your protection. Some of the factors considered by the company can be controlled by us while others are not. The controllable factors should be checked by us so as to lower the premium.

Also Read: ICICI Pru Life i-Protect Term Insurance plans – Should you opt this plan?

10 Factors which affect your life insurance premium

Here is the list of some factors that would affect your life insurnace premium. Some of them can be controlled by us.

1) Consuming excessive liquor or smoking tobacco

Both these bad habits have a negative impact on your health condition and thus increase the risk of being sick or early death. The insurance companies always ask about these habits before fixing the premium charged. If you are a non-smoker, you will be charged much less as compared to the premium paid by the smoker. Similar is the case with the drinkers.

Tip: Avoid smoking and liquor, pay lower life insurance premiums. Now don't stare at me, I don't smoke, its easy to give this tip to you.

2) Nature of occupation

If you are involved in a risky job like sea diving, bomb defusing unit, fire fighting, etc., then the insurance premium charged by the company would be much higher than the normal person who is working in an office. In fact, in a few cases the company may even refuse to provide the insurance cover as the dangerous jobs, increases the probability of death to a high extent.

3) Your state of health

Your state of health is a primary factor that determines your mortality risk and consequently determines your insurance premium. If you are suffering from heart disease or diabetes, it is obvious that you are exposed to death more readily than a normal healthy person without any disease. This is the reason most of the insurance companies ask for your total health status before issuing a policy. To add on, they even insist on getting the health check-up and basic tests done, if the applicant’s age is above a certain limit. In case of very high cover also, a medical examination may be asked irrespective of age.

Tip: Keep your heart healthy, do regular exercise and stay away from junk food.

4) Tenure and the value of the policy

The longer the policy tenure, the higher is the premium because the insurance coverage is being bought for a longer period. For instance, if you are taking a policy for tenure of 20 years, your premium amount would be higher than that of people who opt for less years of coverage because the company will be covering the risk of your 20 years of dying. The value that is to be compensated by the insurance company in case of death during the policy cover also determines the policy premium. The higher the value, the more would be the premium.

Tip: Take your term insurance in early stages of your life for the long term. This would come with lower premiums for long term of 15-20 years.

5) Obesity

The problem of obesity beyond a certain limit asks for a higher premium as the obese person is more exposed to the risks of a variety of diseases like heart problem, diabetes, blood pressure etc.

6) Mode of premium payment

There are many options available to the insured regarding the payment of insurance premium like annual, bi- annual, single payment, quarterly or monthly. If we calculate the total out the go of the premium, it is always the annual premium that is cheaper as compared to monthly or quarterly premium.  The reason behind it is that the company gets the amount for the whole year in advance. Also, it saves the administrative costs of receiving single or annual premium.

Tip: Prefer paying annual premium instead of monthly or quarterly premium.

7) Riders increase the premium

Riders are the additional benefits that get be attached to the policy. Obviously, the policy cost increases with each rider attached. Therefore, we need to very careful while attaching the rider to the policy.

Bonus tip: Unless you really need the rider, don’t consider it. You can take seperate policy for riders.

8) Policy purchased online or offline

The insurance policy purchased directly online from the company is comparatively cheaper as it eliminates all the intermediary costs like commission of an agent, distribution channels, administrative costs, etc. buying a policy online or offline also depends upon the factor that how much the policy needs to be customized.

Tip: Prefer and consider online term insurance plan instead of offline plan.

9) Gender

This is also one of the main determinants of the policy premium. As per statistical studies, women live longer than the men and all things remaining the same, a woman is charged with lower premium in comparison to a man. 

You may also like: Aviva Affluence HNI ULIP – Should you invest?

10) Genetic factors

The insurers generally ask about the family history of the client and the persons that are susceptible to certain diseases genetically like diabetes, heart problems are charged with a higher premium as they carry a higher risk of carrying the genetic diseases.

Each and every factor indicated above has noticeable impact on the policy and the insurer should try to minimize the premium by controlling the controllable factors. It is always advisable to compare the rates of different companies before considering a policy. However, other factors like policy coverage, insurance company reputation, customer service, claim settlement ratio, etc. should also be considered and not base your decision solely on the premium.

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Factors which affect your life insurance premium

Suresh KP


  1. Suresh,

    I bought a online term insurance plan few years back . I am paying the premium every year. When I was buying the plan, they did medical test. that time i dont have any diesesases. But recently I got Diabetes. Should I inform the insurance team about this now?…




  2. HI Suresh

    Need a suggestion regarding Term Insurance .
    Regarding Smoking what should a person give as he left smoking from past one year one year ?

    Should he go with Smoker or NonSmoker?


  3. your explanation about tenure and riders is misleading
    the fact is that the longer the period, the premiums rate gets reduced as one pays for a longer period
    rider cost money no doubt, but it is a very small fraction of the base premium and the benefits that one can derive from riders far exceed the premium charged

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