Factors Affecting Life Insurance Policy Premium

People with a family history of hereditary diseases could be asked to pay a higher premium

Factors Affecting Life Insurance Policy Premium
Life insurance premium
Nirmala Konjengbam - 06 April 2021

Have you ever wondered how your life insurance policy premium is calculated? The life insurance companies factor in a lot of criteria while calculating the premium cost.

We take a look at the factors that influence your premium cost.


One of the most important criteria for calculating premium is the age of the policyholder. You are perceived to be at fewer risks health-wise when you are young and hence the cost of a policy is cheaper when taken at an early age. Also, young people are expected to have longer policy coverage and premium payment term, which means more revenue for insurers, hence, this also leads to cheaper premiums for young customers.

Health conditions

People suffering from health ailments will be required to pay a higher premium as compared to those who are not on any medication. This is mainly because the chances of making a claim are higher among people already suffering from some diseases.

Lifestyle habits

People who smoke and drink frequently have higher chances of developing life-threatening diseases. If you fall in this category then you will be required to pay a higher premium, sometimes 50 per cent more than normal.


In the insurance world, the premium varies according to gender. A female policyholder will be required to pay a lesser premium as compared to a male of the same profile and criteria. This is mainly so because men are perceived to be at higher risks and have low life expectancy.

Policy term

The longer the policy duration, the lower the premium. A long-term policy ensures longer premium flow for an insurance company and that's why they charge lesser for policies with longer coverage.


If you are employed in a high-risk industry such as construction, mining, or shipping, then you will be charged a higher premium. The premium would be lesser for people who are employed in office jobs and are less at risk of meeting an accident at the workplace.

Premium payment term

People who pay the premium annually save some money as compared to those who pay premium bi-annually, quarterly, or monthly. In the case of annual payments, insurers save regular administrative costs and hence peg it at a cheaper rate than a quarter, and monthly installments.

Family history

Certain diseases like diabetes are considered hereditary. So people who have a family history of such diseases could be asked to pay a higher premium as compared to others.

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