What is life insurance premium?
It is regular amount pays to insurance company to purchase a policy and to keep it in force; in return the insurance company agrees to pay your nominee or beneficiary a sum of money upon your demise. In the event you suffer total and permanent disability, the payment will be made to you; in these circumstances the money is usually payable in installments.
How is your life insurance premium calculated?
Life insurance companies don’t take risks to cover an insured when they are determining the rates, they want to take precautions to ensure the insured won’t die prematurely, because the pay out will be more than the amount the insured paid.
The insurance companies collect the premiums from the policyholders and pay for the overhead and administrative expenses, they invest the money to create a pool of money to pay claims and make their profit from investment, premiums collected are not enough to sustain, so they have to calculate precisely, otherwise their business will be at a loss.
The calculation of life insurance premium is based on age, gender and health
A younger person has a longer life span, so his/her policy has a longer maturity, and it is axiomatic that his premium will be cheaper. According to mortality table women outlived men, so women have lower rates on life insurance. Family medical history also plays an important role, for example if a person’s parents or family members suffered diabetes or high-blood pressure he may have to go for medical check-up before he buys a policy, and he is classified as high risk buyer, the insurance company will access him and consider whether or not to take the risk to insure him.
Each an every insurance company sets its own rates of life insurance premium, the type and amount of insurance you purchase and your lifestyle habits also affect your premiums, such as if you are a smoker you will pay a higher rate.