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How is Term Insurance Premium Calculated

By Finserv MARKETS - Jan 3,2020
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How is term insurance premium calculated

A term insurance policy is a specifically designed life insurance policy that provides financial security to the policyholder’s family in the case of any unfortunate eventuality. To avail the policy, one has to pay premiums for a given term. If the policyholder passes away during the term of the policy, the family receives a lump sum amount, as death benefits, according to the terms and conditions of the policy. Term insurance plans are the easiest and most inexpensive way of securing the financial future of a policyholder’s family.

How is term insurance premium calculated?

For receiving the benefits of a term insurance policy an individual has to pay premiums regularly. The premium amount is decided by the insurance company on the basis of following factors:

Age of the individual:

Often the first factor used for calculating term insurance premium is the individual’s age. Usually, any individual between the age group of 18 and 65 years can avail a term insurance policy. But the premium amount increases with age. This is because an individual’s health concerns increase with age. Therefore, experts suggest individuals to subscribe for a term insurance policy at a younger age to offset the high premium amount. In a nutshell, the younger you are, the lesser premium amount you have to pay.

Lifestyle habits:

A key factor for calculating term insurance premium is your lifestyle habits like tobacco and alcohol consumption. Insurance companies provide term policies at cheaper rates to non-smokers. Consumption of alcohol is another factor which can result in a higher premium amount. Insurance companies usually ask the individual to declare these habits while applying for the policy. As tobacco and alcohol consumption results in greater health risks to the policyholder, a higher premium amount is charged.

Occupation of the individual:

Insurance companies also calculate the premium amount on the basis of an individual’s occupation. There could be higher premiums for those employed in hazardous professions like police, military, para-military, fire fighting, deep sea diving and others. In some cases, the insurer can deny the term policy altogether to those employed in high-risk professions. Thus, a regular office job means a lower premium amount as compared to hazardous jobs.

Existing health conditions of the individual:

The existing health conditions of an individual is another key factor for calculating term insurance premium with the help of term insurance calculator. Many insurance companies ask an individual to undergo specific medical and diagnostic tests before issuing a term insurance policy. This is because an individual with existing health concerns like hypertension or diabetes is at a higher mortality risk vis-a-vis an individual who does not have an existing health conditions. Similarly, those diagnosed with other critical illnesses can be provided the policy at a high premium rate, subject to specific conditions. Some insurance companies also take into account factors like an individual’s height and weight. If an individual is found to be obsese, a higher premium amount can be charged.

Tenure and value of the policy:

Usually, term policies with a longer term come with higher premium charges. For instance, a term insurance policy for 20 years will be comparatively expensive as compared to a 5-year term. Also, policies with higher value, for instance Rs 2 crore and above, can also have a higher premium amount.

Riders or add-ons:

Term policies can also be purchased with riders like permanent disability and critical illness. While riders increase the benefits of a term insurance policy, they can also result in increased premium amount.

How is term insurance premium calculated

Source: Policy Bazaar


Thus term insurance policies are easily the best way to secure your family’s financial future in the case of an unfortunate eventuality. When comparing term insurance policies you must remember that premium amount is calculated on the basis of factors like your existing health condition, lifestyle habits, age and profession.D11

In fact, the term insurance plan, available on Finserv MARKETS, offers extremely affordable premiums for extensive coverage of Rs. 1 crore. Along with the regular benefits of a term insurance, you can get comprehensive coverage with add-ons like death due to accident, accidental permanent disability or critical illness. If they survive the policy term, the policyholder can also get the added flexibility of receiving maturity benefits (return of premiums), if the benefit of return of premium is chosen.

You can also avail numerous tax benefits on this insurance policy. Ensure you’ve opted for a critical illness rider so as to avail tax deduction under Section 80D for the same. The premiums you pay under your plan are also tax deductible up to Rs. 1.5 lakhs under Section 80C. As per Section Section 10(10D), the payout you receive from your term insurance policy is also deductible.

Thus, term insurance plans are extremely cost-effective. Secure your family’s future and save on your tax outgo by opting for a comprehensive term plan.

Finserv MARKETS, a subsidiary of Bajaj Finserv, is a one-stop digital marketplace that has been created for consumers on the go. It offers 500+ financial and lifestyle products, all at one place. At Finserv MARKETS, we understand that every individual is different. And that’s why we have invested in creating a proposition – Offers You Value. A value proposition that ensures you get offers which are tailor made for you. We also offer an amazing product range and unique set of online offers across Loans, Insurance, Investment, Payments and an exclusive EMI store. Be it in helping you achieve your financial life goals or offering you the latest gadgets, we strive to offer what you are looking for. From simple and fast loan application processes to seamless and hassle-free claim-settlements, from no cost EMIs to 4 hours product delivery, we work towards fulfilling all your personal and financial needs. What’s more! Now enjoy the same benefits in just one click with our Finserv MARKETS App.


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Bajaj Finserv Direct Limited ("BFDL") is primarily engaged in distribution of financial products and services through its digital platform (“Bajaj Finserv MARKETS”) and inter alia renders services of customer acquisition, providing preliminary credit support activities, fulfilment services and post-acquisition customer services to Banks, NBFCs, HFCs. BFDL is also a registered Corporate Agent (Composite) under valid IRDAI registration number: CA0551 valid till 10-Apr-2024 for solicitation and servicing of Insurance Products. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522