Factors Affecting Cost of Life Insurance Premium

Life is precious and we make efforts to protect it from different circumstances. The cost of life insurance premium is determined by the level of coverage we require. The insurance companies also take certain criteria into consideration while calculating the premium.

Read more
Get ₹1 Cr. Life Cover at just ₹411/month*
No medical checkup required
Save more with upto 10% discount
Covers COVID-19
Tax Benefit
Upto Rs. 46800
Life Cover Till Age
99 Years
8 Lakh+
Happy Customers

*Tax benefit is subject to changes in tax laws. *Standard T&C Apply

** Discount is offered by the insurance company as approved by IRDAI for the product under File & Use guidelines

Get ₹1 Cr. Life Cover at just ₹411/month*
No medical checkup required
Save more with upto 10% discount
Covers COVID-19
+91
View plans
Please wait. We Are Processing..
Get Updates on WhatsApp
By clicking on "View plans" you agree to our Privacy Policy and Terms of use

Below are some of the points listed which affects the life insurance premium.

  • The level of coverage a buyer would prefer to buy, the higher the coverage, costlier becomes the life insurance policy.
  • The health condition of the policy buyer also helps in determining the cost of the life insurance plan.
  • The age and sex of the applicant matters while calculating the premium. The older you are the premium becomes costlier. And for females the cost of the premium is slightly cheaper because as per the analysis women live longer than men.
  • Mortality cost is the cost of paying claims to the beneficiaries of insured people. The cost for most insurance companies has declined over the years. This means there is a longer period to collect premiums and the death claims are paid out later than originally anticipated. Still companies have to be careful while selecting the new policyholders who are basically healthy. They should charge rates which reflect the actual mortality risks of those people who have serious health problems or who engage in potentially dangerous activities. Otherwise, they might have higher than expected costs for death claims, which could cause financial difficulties.
  • Operations cost, the cost of operating the insurance company and selling its products. These costs includes marketing costs like commissions, operating sales offices, advertising expenses, etc and non-marketing costs like the cost of constructing and maintaining company buildings, salaries of officers and staff, etc.
  • The return on investments, the Insurance companies invest money until they need it to pay claims or expenses. The good investment returns may help pay off their expenses which might ultimately reduce the cost of insurance premium. This will enable them to sell policies at lower premiums and compete more effectively against other insurance companies.

The overall effect of all these factors determines how much the company needs to charge in order to provide life coverage while making a profit and paying dividends to its policyholders, if it is a mutual insurance company. Several large mutual insurance companies have recently transformed into stockholder owned companies through a process called demutualization. In stockholder owned companies, dividends are paid to the stockholders. 

Companies that feel the need to become more competitive can offer higher benefits to the customers by lowering the cost of the premium and pass on the savings to the customers. 

  • Cut marketing costs by reducing marketing staffs, trimming commissions, selling directly to customers by phone, mail, or over the Internet,
  • Cut non-marketing costs by having less workers and managers, move to a smaller building, lowering the pay scale for new workers, cutting raises and bonuses for existing employees;
  • Increase return on investment by making use of various investment instruments.
Written By: PolicyBazaar

Life insurance articles

Recent Articles
Popular Articles
How to Cancel SBI Life Insurance Policy?

18 Nov 2021

As per the Insurance Regulatory and Development Authority, you...
Read more
Max Life Insurance 1 Crore Plan

14 Oct 2021

With many novel diseases surfacing, life seems to be fleeting...
Read more
Life Insurance for Senior Citizens Over 70

14 Oct 2021

Although you may be past the opportunity to buy life insurance...
Read more
Life Insurance for Senior Citizens over 80

14 Oct 2021

If you are the bread earner for your family, no time is bad to...
Read more
Life Insurance for Armed Forces

14 Oct 2021

The Indian arm forces are our pride. They risk their lives to...
Read more
How to Check LIC Policy Status, Details, Statement via Online/SMS/Call
Last year, Mr. Rajiv Verma bought a Child LIC policy to provide financial security for his kid's future. However...
Read more
Surrender Value in Insurance
Surrender Value in Insurance Have you bought a life insurance policy which is not as per your requirement? Are you...
Read more
LIC Login: LIC Customer Login Process at Online Portal
The LIC login portal is user-friendly. With the LIC online login facility, customers can easily avail themselves of...
Read more
How to Check PLI Status?
How to Check PLI Status? Dating back to February, 1884, PLI (Postal Life Insurance) is one of the oldest life...
Read more
Life Insurance: Checking Policy Status
Life Insurance: Checking Policy Status Buying life insurance policy is the first step towards building a corpus...
Read more
Close
Download the Policybazaar app
to manage all your insurance needs.
INSTALL