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Factors That Determine Your Life Insurance Premium

Know the ingredients that cook up your life insurance premium which ultimately end up giving you a sweet or sour taste.

When you purchase a life insurance policy you have to go through a series of questions. The answers to these questions helps in determining how much risk you pose and how likely it is that the insurance company has to pay out in the form of a claim. Every insurance company has their own criteria for issuing the policy and if so at what price. This is the reason premiums of the same policy differs from person to person.

Let’s understand the factors that decide the life insurance premium.

List of Factors that Determine On life Insurance Premium


Age is the prime factor in deciding the premium of the life insurance policy. The reason being is a young person’s body is less likely to contract diseases. Also, a young person is more likely to choose a longer duration policy in which he/she will be paying more number of premiums than compared to someone older. Therefore, the premium amount is less if you are buying an insurance at a young age than compared to older age where premium calculation is always high as risk to insurance company is more and duration of the policy term is less.


Although it is said all men and woman are equal but for insurance company’s woman live longer than men and pose a lesser risk of claim. Hence, premiums for females is slightly lesser than compared to males falling in same criteria.

3. Smoking and drinking

We all are aware smoking and drinking are injurious to health and can increase the risk of contracting life threatening diseases. A person who smokes or drinks alcohol has to pay a higher premium in the range of 40% to 60% than a non-smoker or drinker. Hence, smoking and drinking is not only injurious to your health but also to your wealth.

4. Policy Term

The policy term plays an important role in determining the premium. The longer the duration, cheaper will be the premium. Hence, long term polices are cheaper then short term policies.

5. Platform you are using to buy the policy

Premium also depends on the platform you are using to buy the policy. Today due to internet revolution and easy access of internet on smart phones, all major insurance companies have an online presence enabling easy purchase of policies online. The cost of selling policies online is also less as it involves less administration cost which helps in cutting down the premium. Offline platform involves lot of intermediary cost such as commission, paper work, administration which adds up to the premium payable.

6. Premium payment frequency

You can choose the frequency of premium payment as monthly, quarterly, semi-annually and annually. However, the insurance companies charge higher premium based on the frequency of payment selected. For them if you choose monthly payment then the cost of collection, administration, paper work will be more. This cost is added to the premium payment. Hence, if you select annual payment mode then you pay less premium and also the insurance company gets the fund for the whole year in one shot.

7. Your current health status

Insurance companies ask you to go through medical tests to evaluate your current health situation. Based on your medical test results insurance companies decide on the premium amount. So, if you are deemed medically fit it will help in lowering your premium amount calculation. For example

  • Obesity: Obesity increases the chances of people contracting various diseases such as diabetes, heart problem, blood pressure etc. These diseases can pose a higher risk causing death and as a result the premium gets high.

8. Occupation

Certain occupations are considered more dangerous like shipping, industry workers, miners, fisherman are expected to pay more premium than people working in an office job where the work environment is relatively safe.

How much impact each of the above factors has on your life insurance rates also depends on how the insurance company rates each factor. As every case of premium calculation is taken on an individual basis, it is prudent that before buying a life insurance policy you should compare the quotes from different insurers to get the ideal life insurance deal.

Recommended Read: How to Choose & Buy the Best Life Insurance Policy In India?