Life insurance premium can be described as a payment that policy buyers make to their insurance provider for their policy. Such a payment is usually one-time or recurring based on the policy term. Typically, the frequency of insurance premium payments could be monthly, quarterly, semi-annually, yearly, or a single lump sum payout. 

Notably, a life insurance policy remains valid only if its premiums are paid on time, and a factor of the premium is later paid as a sum assured when the policy benefits become active. Additionally, the cost of the premium tends to vary among insurance policies and policy buyers. Having an idea about the factors that influence the cost of insurance premiums can help intending buyers manage the same or understand the logic behind it. 

Factors Affecting the Cost of Insurance Premium

These are some of the key factors that affect the cost of life insurance policy premiums – 

  • Coverage or sum assured: Usually, an insurance policy with a higher coverage or sum assured attracts a high premium amount. 
  • Healthy lifestyle: Individuals who lead a healthy lifestyle and don’t indulge in poor lifestyle habits such as drinking, consuming tobacco, or smoking cigarettes are likely to pay a lower premium for insurance coverage. 
  • Policy buyer’s age: The age of intending policy buyer is crucial in determining the policy premium. This is because young individuals belong to the low-risk category for insurance companies. As a result, many recommend individuals purchase a life insurance policy early in their life. 
  • Policy buyer’s gender: Data suggests that women tend to live longer than men. This is why women are more likely to opt for long-term policies, in turn, attracting low insurance premiums.
  • Policy buyer’s profession: The intending policy buyer’s profession influences the cost of the insurance premium. Typically, individuals involved in risky occupations are likely to bear a higher insurance premium compared to those whose profession has a low or zero risk scare. 
  • Policy term: A longer policy term accompanies a lower premium amount. On the other hand, life insurance policies with shorter tenure are costlier.

However, the life insurance policy premium may also depend on several other factors and parameters that are set by the policy provider. Hence, it is important to find out the same from the insurance agent beforehand. 

While not all the factors can be monitored or controlled by the intending policy buyer, some can be adjusted to help lower insurance premiums. Check out the tips mentioned below to lower the insurance premium amount. 

Tips to Reduce Life Insurance Premium

You can apply these tips to lower the life insurance policy premium –

  • Select a suitable insurance policy term: As discussed, the insurance premium amount is closely dependent on the policy term. This means a longer policy term comes with lower premiums and a shorter term accompanies a higher term. It is usually recommended to opt for a long policy term to ensure financial protection for the majority of one’s life. 
  • Avoid adding unnecessary riders: Insurance policy riders serve as an add-on that helps customize insurance coverage and enhances the scope of the same. Today insurance providers offer multiple riders including critical illness cover, accidental death benefits, and waiver of premium. However, adding a rider to one’s existing insurance plan also increases the premium burden. This is why individuals must add only those riders to their insurance plan that they would need. 
  • Compare insurance policies: Individuals should compare different insurance policies, especially their features online. This way one could pick an insurance policy that suits their budget and their requirements. 
  • Adopt healthy lifestyle habits: Poor lifestyle practices affect one’s health, making them prone to illness. This makes them risky. Hence, individuals attract a higher premium. However, individuals could avoid this by improving their lifestyle and daily habits. To begin with, individuals should avoid alcohol, tobacco, and smoking, and lead a more active lifestyle. 

Besides these, individuals should not delay the process of getting a life insurance policy. In fact, they should make it a priority to avail one at an early age to benefit in the form of lower premiums and extensive coverage. Individuals can use an insurance calculator to estimate the premium they are likely to pay for a policy. 

What is a Life Insurance Premium Calculator?

A term life insurance calculator is a useful financial tool that helps users to estimate the amount of money they have to pay as a premium for a policy. The tool used details such as age, tenure, premium frequency, and sum assured to determine the insurance premium. Individuals can access such calculators online and use the tool by entering the basic details. 

To use the same, users need to feed details such as –

  • Insurance policy name
  • The applicant’s name
  • Sum assured
  • The frequency of premium
  • Insurance tenure
  • Riders 

The calculator weighs in these factors and estimates the premium the user would have to pay right away. Users can also enter different variables to determine which combination will suit their requirements. 

Benefits of Life Insurance Premium Calculator

Here are the most popular benefits of using a life insurance policy –

  •  It helps to pick a suitable insurance policy

The tool helps users determine which life insurance plan would be suitable for their financial capacity. 

  • Quick and hassle-free calculation

The online financial tool simplifies the premium calculation by offering quick results. This saves time and also allows users to compare multiple insurance policies. 

  • Accurate calculation

Since the premium calculation is completely automated, there’s no scope for any inaccuracies. Such a feature allows users to estimate the premium amount accurately. 

  • Helps avail accurate results for free

The insurance premium calculator can be accessed online for free of cost. This allows individuals to use the tool without any hesitation and multiple times to make an informed decision. 

Hence, an insurance premium calculator comes in handy in more than one way and helps users pick a plan that suits them the best. However, individuals should not focus their energy on selecting an insurance policy based on its premium. They should also weigh in factors such as policy terms, exclusions, claim settlement ratio, and rider benefits before selecting a life insurance policy.

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