How to do Life Insurance Premium Calculation

When you are purchasing a life insurance policy, it will be useful to calculate insurance premiums and lay out a financial plan for the years to come. It is also essential to regularly review your life insurance needs to ensure that the policy aligns with your life changes. For example, events in life such as marriage, the birth of a child, income fluctuations, child’s education, and investment in properties can impact the insurance premium calculation. It is best to have an early start to avoid any regrets in the future to ensure that you and your loved ones are financially secure.

It makes sense to invest in a life insurance plan at an early age, preferably when you start earning, and some people depend on you financially. Age affects the insurance premium calculation since younger people are more likely to be healthier and opt for a more extended period of cover, thereby enjoying lower insurance premiums.

It might seem surprising, but the gender of the insured also impacts the insurance premium calculation. On average, men also tend to be involved in riskier work or lifestyle environments. It may result in women paying lower insurance charges than men.

Your medical history plays a massive role in the insurance premium calculation. Insurance providers examine the condition of your health to understand future financial needs better.

However, the premium calculation impact also depends on the severity of any illnesses you may have. In the case of a life-threatening disease, the premium costs are likely to be higher.

Also Read: Why Medical Test is Important in Term Insurance?

The insurance premium calculation also takes into account the number of financial dependants on the insured. If you are the family's sole breadwinner, you might require higher coverage for your family members. It will translate to a higher premium cost consequently.

People exposed to high-risk environments in their jobs, for example, pilots, soldiers, mining, or oil and gas workers, may expect a higher insurance premium for their policy.

It is essential to consider any financial liabilities that might demand a huge portion of your income, such as property loans. Insurance premium calculation must be in alignment with any such liability to ensure your ability to pay them.

There is no prescribed right or wrong time to invest in an insurance policy. However, purchasing a plan at a younger age might benefit you since the insurance providers do a thorough risk assessment.

A more youthful individual will likely present lower risks and favour the insurance premium calculation. For example, a person in his late twenties is much less likely to suffer from a severe illness than someone in their late fifties.

It will reduce the coverage amount required by them. Additionally, an insurance plan at a younger age will allow you to spread the duration and decrease the premium costs.

In general, there are various types of life insurance policies catering to different financial needs. It will help assess your and requirements from a plan and investing abilities to calculate insurance premium effectively. Furthermore, there are various combinations of riders you can opt for to strengthen your coverage further.

For example, Axis Max Life offers a critical illness insurance to your term insurance policy to equip your plan to provide healthcare assistance.

The amount of coverage that an individual requires depends on their current and probable financial condition in the future. Charting major expenses while taking into account any unfortunate circumstances will significantly help in insurance premium calculation.

In general, the lesser coverage, the cheaper the premium costs. The number of dependents and lifestyle of the insured also impact the insurance premium calculation.

Insurance providers will also look at your personal information, such as medical and driving records, credit history, lifestyle, occupation, and smoking or drinking habits. It is to accurately assess the risk profile of the insured and apply it in insurance premium calculation.

It is essential to choose a suitable policy term for your financial condition, considering the liabilities. Insurance premium calculation assumes the insured individual’s ability to pay premium costs for the tenure as well. For example, if you are a salaried individual, it makes sense to opt for a longer-term that will allow a steady premium rate.

It may seem appealing to reduce the tenure of the plan and increase premium costs, but insurance policies serve the purpose of providing a financial cushion. Therefore, remember to carefully assess your long-term needs at the time of insurance premium calculation.

Since medical history has a significant impact on the insurance premium calculation, it will work in your favour in more than one way to maintain a healthy lifestyle. Insurers consider smoking or drinking habits as health risks and might, therefore, charge a higher premium due to it. Be sure to take care of your health and avail of optimum benefits from your insurance policy.

While you may not directly affect the insurance premium calculation much, certain tax benefits may relieve some of the pressure. The Income Tax Department of India allows tax deductions and exemptions under Section 80C when it comes to life insurance expenditures. It serves as an incentive to buy life insurance without worrying about premium costs.