Confused why you are paying more premium than someone else?

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Do you often wonder why your best friend who has bought the policy at the same time as you have, pays lesser premium than you do for the same life cover? Well, don't be confused! There are many criteria which insurers consider, when deciding the premium amount that you pay for your policy.

To end all the confusion, here are the factors that insurers take into account to calculate your life insurance premium:

Confused why you are paying more premium than someone else?


Age is the first factor that insurance providers take into account when they calculate premium. To illustrate; a 25-year-old man will have to pay less premium than a 35-year-old man because the chances of the former getting afflicted with a critical disease are far less than the chances of the latter suffering from the same. It therefore affects your life expectancy which in turn has an effect on your life cover.


It is commonly and scientifically known that on average, women tend to live longer than men. Therefore, risk associated with insuring the life of a man is more than that of a woman. This is why insurers ask women to pay less premium than men of the same age.

Lifestyle Habits

It is medically established that if you smoke or drink, the chances of your falling prey to life threatening diseases increase manifold. This in turn increases the risk an insurer must bear to cover your life and thus the premium charged from you is higher than a person who has a healthy lifestyle.

Family's Medical History

There are certain diseases like cancer, Alzheimer's, heart ailments, and diabetes etc. that run in the family. Therefore, if you have a family history of any such disease then the likelihood of your suffering from it increases, and insurers are likely take this into account while deciding the premiums for your policy.

Your Current Health

Before providing you a life insurance cover, insurance providers assess the risk of covering your life by making you go through a complete medical examination. They check your weight, height, blood pressure, blood sugar, cholesterol level, vitamin and nutrient deficiencies, and other health metrics. This procedure is known as 'underwriting' and it helps insurers gauge the risk associated with your policy.

Risk to your life

Apart from diseases, there are certain other factors that pose a risk to your life, and insurers consider them while calculating your policy's premium. If you indulge in high-risk adventure sports like sky diving, deep sea diving, and mountaineering etc., then the premiums you pay would be higher. Professional hazards, if you are employed as a firefighter or pilot etc., also prompt insurers to increase your premium.

Type of Insurance plan

Your premium amount also depends on the type of life insurance cover that you have bought. For a term plan, the premium is lowest since it provides you only life cover and no pay-out on maturity. On the other hand, ULIPs help you to grow your wealth by investing a portion of your premium in the equity market.

Apart from these seven factors, there are certain other minor factors, such as your driving record and any recent bankruptcy that some insurance providers take into account when calculating your premium. Additionally, your premium also depends on the policy you are buying and whether you are taking any extra riders or not.

Contrary to what is believed, curiosity didn't kill the cat. It is therefore prudent to ask a lot of questions and end all your doubts before buying a financial product like life insurance.

Read more about: insurance, premium
Story first published: Tuesday, December 29, 2015, 10:24 [IST]
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