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How Is Life Insurance Premium Calculated?

Life insurance is an important component of living a financially secure life. It assures you that if anything unfortunate were to happen to you, the sum assured from the policy will help your loved ones deal with the financial repercussions of the same. In return for this security, the policyholder pays premiums. This premium can be paid as a lump-sum amount, or more commonly, as payments made at regular intervals. The premium for each life insurance policy and its holder differs and is dependent on several factors. Let’s learn more about the same in this article.

Aspects to consider when the life insurance premium is calculated 

The age of the policyholder 

This is one of the most important determinants of the premium. When you buy a life insurance policy early in your life, you incur significantly lower premiums than if you were to buy one at a later stage. This is largely so because younger individuals, for instance, people in their 20s, tend to have lower health risks and a larger time frame to build the sum assured they want. This is whythe first detail that a life insurance premium calculatorusually asks for, is your age.

The medical history of the policyholder 

It does not matter whether you are 25 or 35 if you have a medical history fraught with serious health issues. The premium for someone in such a situation is going to be high. The insurer may also want to look at your family history, more specifically, your parent’s medical records, to know whether you are vulnerable to any diseases caused because of genetic factors. Such diseases, and your vulnerability towards them, can increase your risk profile and, thus, your term insurance premium.


Male policyholders are more likely to pay higher premiums than female policyholders. This is partly because women, in general, tend to live longer than women. Men are also more prone to riskier habits in their lifestyle, such as smoking or drinking heavily. They also tend to work in more dangerous occupations than women. This reduces the risk profile for women, leading to a reduced premium when they buy a life insurance policy.

The coverage and tenure 

If you are looking for all-around coverage and have bought multiple riders for the same, then you will incur a higher premium. However, a high premium should not put off anyone from seeking the protection they want for their loved ones.

Similarly, if you have opted for a longer tenure in your term policy, then, too, you would incur a higher premium. Policies with lower tenures incur lower premiums as the insurer is taking the risks onboard for a shorter period. Opting for a longer tenure might mean a higher premium, but it also means you enjoy the benefits of life insurance for a larger duration.

The number of people financially dependent on you 

If you are the sole earning member of your family, without any financial aid to support you, the premium could be higher for you. On the other hand, if you have a spouse, sibling, son/daughter, and so on, contributing to the house financially, then the premiums could be lower.

How can one reduce their life insurance premium?

Use the life insurance premium calculator 

While this tool does not automatically reduce the premium, it does play a role in helping you plan your life insurance plan. It gives you an estimate of the premium based on several factors. You can then tweak around some of the factors such as the sum assured, tenure, riders, and so on, to reach the premium that is within your budget.

Have a healthy lifestyle 

A healthy lifestyle can help in reducing your premium amongst other things. If you have a disease such as diabetes, and a healthy lifestyle is helping you control the symptoms of the same, then too, the premium may be lowered. In general, individuals who eat healthily and exercise regularly tend to have a stronger immune system and thus reduce the risk for the insurer. It may also help to cut down on unhealthy habits such as smoking or drinking heavily.

The importance of a good life insurance policy cannot be underestimated. If high premiums are an obstacle for someone looking to buy a policy, then they can take the help of the information provided in the article and begin enjoying the benefits of life insurance as soon as possible. Just remember to read the terms and conditions of the policy before you sign it.