What are the Factors that Determine the Term Insurance Premium Rate?

t Determine Term Insurance Premium Rate

The term insurance premium is the amount that the policyholder needs to pay to the insurance company for a specific tenure in return for the insurance coverage they want to have. The policyholder can choose from three different premium payment options offered by the term insurance policy; these three options include single pay, limited pay and regular pay. To choose the most comprehensive plan at a lower premium rate, it is important to note the various factors that determine the term insurance premium rate.

Here we have discussed some of the factors that determine the premium rate of the policy in detail-

Factors That Affect Term Insurance Premium Rate

Listed below are some important factors that affect how insurance premium is calculated:


This is one of the most important factors that affect the term insurance premium rate. With the increase in age, the premium rate of the term insurance plan also increases. This is because old people are more prone to health complications, which, in turn, poses a higher risk to the insurer, whereas younger individuals are considered healthy. Thus, it is advised to buy a term insurance plan while being young so that one can get maximum coverage at a minimum premium rate.


This factor is related to mortality. Women, in general, have a longer lifespan than men. Thus, many life insurance companies offer lower premium rates to female insurance buyers. On top of this, women can also avail the of premium discounts.

Medical history

This is another major factor that impacts the term insurance premium rate. The insurance companies ask for medical records before issuing the policy. In case a policy buyer has a history of medical conditions such as heart disease, diabetes, etc., then the premium amount of the policy increases automatically. In some cases, the insurer may even reject the application.

Smoking habits

The health risk related to smoking includes lung diseases, cancer, etc. Thus, a person with a smoking habit tends to be risky for the insurance company. Therefore, the insurance company charges a high premium rate for buyers who smoke.

Marital status

The marital status of an individual plays an important role while processing the policy application and deciding the premium amount of the plan. If an individual chooses a joint term insurance plan, he will need to pay a higher premium as compared to an individual term insurance policy.


Some occupations like soldiers, pilots, gas industry workers, anglers, etc. are considered risky by the insurance company. Therefore, an individual working in any of these occupations are required to pay a higher premium as compared to people working in a safe environment like shops, offices, schools, etc.

Apart from these factors, there are certain factors related to policy that affect the premium rate of the term insurance policy. These are:

Whole Life Vs Term

A whole life insurance policy provides coverage for the entire life that is up to the age 99 years or until the death of the life assured. Therefore, it usually involves higher premiums in comparison to the term insurance plan that offers coverage for a specific tenure.

Decreasing payouts

How term insurance premium is computed also depends on whether one wants to have a fixed amount of coverage for the entire policy tenure or wants to opt for decreasing payout option.


In case an individual opts for any rider option while purchasing the term insurance policy, then the premium of the policy increases simultaneously.

Wrapping it Up!

To get the best coverage at a lower premium rate, it is very important to take the required time and effort to do proper research. By keeping the above-mentioned factors in mind, one can evaluate the approximate premium rate of the policy and what are the benefits offered by the term insurance policy. Moreover, they can make an informed decision by choosing the most comprehensive plan for their family.

How to calculate the premium rate of the term insurance policy?
The policyholder can make use of a term insurance calculator to compute the approximate premium rate of the policy.
Do term insurance riders cost an extra premium?
As term insurance riders are add-on cover offered by the policy, the policyholder needs to pay an extra premium to add riders to the base plan.
Does the tenure of the policy affect the term insurance premium rate?
Yes, the premium rates for a term insurance policy with a longer tenure for 25-30 years are less as compared to the premium rates of a term plan with a policy tenure of 10-15 years.
You May Also Like