Having a life insurance is very important but what matters the most is the amount of premium paid for it. Over a period of years, even a slightly lower premium can yield major savings. Now, why do premiums paid on an exact same policy differ from person to person? Let’s take an example to understand this, let’s say there are two persons of the exact same age taking a basic insurance policy from ABC Life Insurance Company on the same day but still the premiums on their policy differs. This happens because of the various factors that life insurance companies take into consideration before deciding on the amount of premium to be paid. This is the work of actuaries who determine the actual amount of premium by predicting the probability of the claim of the policy based on the data like mortality rate, life expectancy etc. If the probability of the claim is high then it is likely that the premiums will also be high for it.

Following are the factors that are taken into consideration by life insurance companies for the calculation of premiums:

  1. Age:

Age of a person is a critical factor when it comes to deciding the amount of premium. Younger persons are required to pay a lower amount of premium as compared to the older ones. This is because younger people are less likely to contract terminal illnesses or die during the policy term whereas the older ones have a higher risk associated with them to contract a terminal illness and die during the policy term.

  1. Gender:

It is said that women live 5 years longer than men. And hence they are required to pay a lower rate of a premium compared to men as the number of premium payments will generally be higher for women compared to men.

  1. Health records:

Life Insurance Companies asks you to go through all the medical tests like cholesterol level, blood sugar level, blood pressure etc. before offering life insurance policies. You would also be asked to present your past health history of having any chronic illness or any other problem that may increase the risk. People with clean health record can pay a lower rate of premium whereas people with chronic illness In the past have to pay a higher rate of premium. There are easy ways to detect a brain cyst and find a cure to them because they are mostly not cancerous.

  1. Lifestyle:

If you are an adventurous person who likes to do mountain climbing, skydiving etc. then the insurance companies will charge a higher rate of premium from you as compared to a person who is not interested in such things. Adventurous people risk their lives by doing these activities and their chances to die or get injured are relatively high.

  1. Medical history:

The insurance companies consider not only your own health record but also the medical history. If you have a medical history of cancer then the chances of you acquiring it will also be high and you will be at a greater risk, so the insurance company will charge a higher rate of premium from you. People having heredity issues would be required to pay a higher rate of premium.

  1. Drinking:

If you consume alcohol then the insurers will be charging a higher rate of premiums from you because consumption of alcohol can lead to future problems. Whereas people who do not drink will be charged with a lower rate of premium.

  1. Smoking:

If you have a habit of smoking then the insurance companies will charge a higher rate of premium from you and in case you are a non-smoker then the insurers will charge a lower rate of premium from you.

  1. Profession:

In case you are into the profession of mining, shipping, piloting etc. then the chances of accidental death and getting grievous injuries are high and the insurance companies will charge a higher rate of premium from you. People who are not in such professions and have a normal professional which involves minimal risk can get policies at a lower rate of premium.

  1. Type of policy:

Type of policy is also one of the important factors that determine the premium. A policy with a longer term, high maturity benefit and death benefit and high sum assured will be given at a higher rate of premium as compared to the policy which is for a shorter term.

  1. Obesity:

A person who is obese carries a high risk with himself/herself of heart attack, stroke, blood pressure etc. The insurance companies, therefore, will charge a higher rate of premium from you for this.

  1. Mode of premium payment:

If you do not pay the premiums annually and pay them in monthly, quarterly or half yearly installments then the amount of premium that you pay will be higher as compared to annual installments. This is because the cost of the insurance company will increase when you pay monthly, quarterly or half-yearly installments. Therefore it is better than you pay the premium annually.

  1. Mode of buying the policy:

If you buy the policy offline then the same policy would cost you higher as compared to the online purchase of the same policy. When you purchase the policy offline i.e. through an insurance agent then the cost of the policy would increase because it will include the commission of the agent, administrative cost, distribution channel cost etc. Whereas if you opt to purchase the policy online then it will not include such costs and you may also get a discount on it because there you are purchasing directly from the insurance company itself.

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CMT Level 1 Study Material

As a matter of fact you can watch live market trading that helps you to connect with CMT. Join a Technical Analysis Course which works on real time markets by using tools & techniques . That’ll give you behavioural understanding of real time Share market. Understanding the money management by real time trading or investment activity. As we know CMT is an MCQ Exam & ask question on application level. Create short notes of Course Content. Get PPT based Short Notes & note interpretation of tools & Techniques on technical analysis. Short Notes help you out to quick revision at the CMT exam time. CMT Books have very complicated language & course content is not properly aligned as it takes topics from various books of different writers. 

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