How Age And Health Shape Your Term Insurance Premium

Term life insurance is the simplest and most affordable form of life insurance. It provides a death benefit payout to the nominee in case the insured person passes away during the policy term. This ensures your family or dependents have financial protection to manage daily expenses and maintain their lifestyle even in your absence.

According to industry experts, term insurance is suitable for everyone — whether you’re a young professional, a self-employed individual, or anyone with financial dependents. Having a term life cover is an essential step toward securing your family’s financial future.

A helpful guideline for determining the appropriate coverage amount for your term life insurance is the Income Replacement Method. You should aim for a sum assured that is approximately 10 to 15 times your annual income.

“This calculation should consider factors such as your outstanding debts, corpus for your dependents, and anticipated future expenses taking inflation as a factor. It's essential to adjust your target based on your age. Younger individuals, with longer earning potential, may benefit from a higher multiple, while older individuals may need to lower their expectations based on their remaining working years,” says Mainak Adhikary, Head of Operations, Go Digit Life Insurance.

Factors Impacting Term Insurance Premium

The premium for a term policy depends on several factors like the sum assured opted for, your policy term, the riders or add-ons that you opt for, and your occupation, but the most important determining factor of premiums is your age, lifestyle and health condition.

Younger individuals are usually healthy and pay a lower premium as they are considered low risk. In contrast, as someone gets older, they are more prone to chronic conditions and lifestyle illnesses like cardiovascular diseases, stroke, hypertension. Therefore, they have to pay a higher premium if they consider buying a new term life cover later in life.

“The lifestyle that you lead is also a determining factor. This can directly impact your health and therefore impact your premiums. Smoking and drinking can deteriorate your health and make you prone to diseases like cancer, heart diseases, stroke, etc. A healthy lifestyle, including daily physical activity and regular exercise, significantly contributes to good health, which insurers recognize as a low-risk profile,” informs Adhikary.

If you are a non-drinker and non-smoker, the premium you pay is typically lower compared to individuals who drink or smoke. It is vital to declare all the vital health information accurately during the policy buying process.

To actively encourage and reward this behavior, many insurers are now also leveraging IoT devices like wearables and apps to track and verify fitness data, often integrating this information into their underwriting to offer discounts on premiums.

“Your current health and family medical history, too, directly impacts your premium. If an applicant has a family history of serious illnesses, they are viewed as a higher risk, which can lead to higher premiums,” says Adhikary.

Disclosing Information

You must always disclose all important information when you apply for the policy. Hiding information is called non-disclosure of material facts and can result in the insurer rejecting a claim later on.

Conversely, being honest can save you money. For instance, if you used to be a smoker but have quit in the last few years, inform your insurer about the same as you may still qualify for premium discount. However, keep in mind that the underwriting guidelines can vary from insurer to insurer. Understand all the terms and conditions of the policy before buying a term life cover.