Every individual must have a term insurance plan in their financial portfolio so that they can provide financial security to their loved ones. However, just for the sake of having a term plan, we often miss the important aspects that should be kept in mind while purchasing the plan. One such important aspect is the premium rate of the term insurance plan and the factors that determine the premium amount of the policy.
Well, in case you have not given much thought on these factors, then don’t worry. For a better understanding, here we have elaborately discussed the factors that determine the premium rate of term insurance plan.
There are various factors affecting the Term Insurance Premium Rate. They are:
Age is the primary factor, which determines the premium rate of the policy. The more your age is while purchasing a term insurance plan, the higher the premium amount of the policy will be. This is because an old person tends to be more prone to health-related problems as compared to a young individual. Thus, it poses a higher risk to the insurance company. As the premium rate of term insurance plan increases with the increase in age, it is always advised to buy a term plan while being young.
According to the studies, it is observed that the life expectancy of women is 5 years longer than men. Also, women tend to lead a healthy lifestyle. Hence, the insurance companies offer a low premium rate of term insurance plan to women as compared to men.
The number of dependents you have plays a vital role in determining the amount of the policy. The more dependents you have, the higher the coverage amount you will require to safeguard their financial future. Thus, this will result in an increase in the premium amount of the policy.
Smoking puts the insurance holder at a higher risk of life-threatening diseases. So, whether you are a heavy or a light smoker, you will be categorized as a smoker in the eye of the insurer, this will result in a rapid increase in your premium amount.
The insurance companies which compute the premium rate of the term insurance plan considers some of the occupations as riskier. Therefore, individual who are soldiers, pilots or work for the oil and gas industry and offshore oil workers, etc. are expected to pay the higher premium amount as compared to the individuals working in a safer environment like shops, offices, schools, etc.
The insurance companies always consider the annual income in order to analyze whether you can afford to pay a regular premium of the policy or not.
The term insurance company will always check your previous medical history, if any and then determine your term insurance premium. Say for example, people suffering from type one diabetes or any life threatening diseases will certainly pay a higher premium. At times, your insurer may not offer you a term plan at all if you have a medical history of diseases such as cancer, etc.
By keeping these important factors related to the premium amount of the policy, you can easily choose the best coverage at an affordable premium rate. However, in order to choose the best plan as per your requirement, it is very important to take time and do proper research while purchasing a plan.
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