Factors used in a Term Life Insurance Calculator

Term insurance is one of the best options to secure your life. Comprehend the factors that go behind deciding your insurance premiums and optimise them.

The odds of you coming across the phrase Term Insurance is quite high. Aggressive advertisement by insurance companies had led for the product to reach out to more and more people. It is the purest and most economical way of getting coverage. Term insurance provides its customers with death benefits for a particular period.
Should anything unfortunate happen to the insured, financial stability of the nominee is well taken care of by the insurance? The ability to choose the sum assured as a lump sum amount, or monthly payment makes it even more flexible. One of the biggest differences between term insurance and other insurance products is that payout is only in case of death. If you live through the term, you do not stand to benefit financially from the plan.
Apart from the primary benefits, term insurances provide excellent tax benefits as well. You stand to benefit under sections 80C and 10(10D). Additionally, you can add up riders to make the most of your insurance with boosted benefits.

The following are some of the major factors that govern the calculation of term insurance.

  • Age

The calculation is pretty straight forward over here. The younger you are, the lesser insurance premium you pay. This is also one of the reasons; most people would advise you to go with term insurance as early as possible. It does not mean in any way that this type of insurance is only for young people.

  • Occupation

Risk levels can be associated with your profession as well. Someone who does clerical jobs is less prone to accidents and thus would get better options to choose. However, some occupations pose a greater threat to the life of insured, for an instance stuntman. In such cases, insurance companies might charge you higher insurance premiums or even deny if it is too risky.

  • Health

Your current health also plays a significant factor in deciding the insurance premium. Most insurances would ask you to undergo necessary medical tests. These tests are primary indicators and give insurance companies a view into any future issues they might expect. An individual with no findings can expect lower insurance premiums.

  • History

Insurance companies also consider your health history and also family health history. Any sorts of chronic of hereditary diseases might end up increasing your insurance premiums. A family with a history of heart-related diseases or cancer might impact your application as well.

  • Gender

It might sound rather odd, but gender also plays a significant role in defining insurances. It is a general fact that women outlive men. Thus, they would end up paying lower insurance premiums.

  • Interests

Your hobbies and interests could also sway the insurance application. People who have risky hobbies like sky diving or scuba diving might go higher up their premiums as well. Insurance companies like to bet on things that are safe and less dangerous.

  • Smoking

If you have been looking for a reason to quit smoking, how about lower insurance premiums? Smoking brings in more chances of illness and health hazards at later stages. And that is the reason non-smokers benefit in this instance.

  • Drinking

As there is a saying, excess of anything is bad. Excessive drinking has capabilities of causing some serious damage to your body. Thus, drinking habits are one of the questions, while filing up term insurance application forms. People who don’t drink or drink less would see the results on their premiums.

  • Term

Awkward as it may sound, the tenure for which you want the insurance also affects the premiums. The longer you want to secure your life, the higher the amount turns out to be. The chances of you seeing over a 10-year period are much higher than a 20 or 30-year period. Another factor that impacts your insurance premiums is the cover that you want for yourself. Simple mathematics again, higher death benefits calls for higher premium amounts.

A combination of all these factors helps insurance companies decide the premium amount they should charge you. Though the weightage varies from company to company.