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Factors That Determine The Price Of A Term Plan

The premium payable for a term plan varies due to various reasons. Mentioned below are some of them. Essentially, the underwriters consider the factors on the basis of whether it will have a positive impact (decrease cost for the insurer) or negative impact (increase cost for the insurer). For instance, the risk associated with providing insurance cover to a 40 year old male is more than the risk involved in providing cover to a 30 year old. And hence, the cost of providing cover is also higher.

Gender: There is a certain discount in premium price of a term plan for a female in comparison to that of a male. For certain products, the discount is in terms of differential of 2 years i.e., the female pays the same price as that paid by a male who is two years younger to her.

Age: The annual premium for a term plan usually increases with age. Hence, it helps to plan early and hence save on premium that need to be paid annually.

Sum Assured: With increasing sum assured, the price of a term plan increases. However, certain products offer discount on higher sum assured. Nonetheless, the discounts offered on a certain sum assured would not bring down the price that is lower than that of a lower sum assured.

Tobacco: If the buyer (to be insured) is a tobacco user, then the premium payable is higher

Term year (period of cover): The premium payable increases with every additional year of cover because of the additional cost (or risk) that the insurer needs to bear

Single premium or Regular premium: In a single premium term plan, the entire premium needs to be paid in one go (at the start of the cover) and hence, the price is lower than that of accumulated annual premiums that need to be paid in case of a regular premium plan.

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Authored by: BuySmartPolicy
Published date: October 02 2015.

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