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Why is the premium amount for term insurance so low?

Sep 29, 2018 | 2 years ago | Read Time: 3 minutes | By iKnowledge Team

Term insurance premiums are determined by considering various factors and parameters, there are also some guidelines which attribute to its low premium.Cost Effectiveness of Term Insurance - Aegon Life

Insurance is generally categorized as financial instruments that cover financial loss during emergencies. In the past few decades, the insurance industry has transformed at a substantial rate. Now it offers numerous policies which provide cover to almost everything around us which includes vehicles and other objects. However, for us humans, the insurance companies have made their products more specific and customizable so that they meet the requirements of the large and diverse populace.

Term insurance is among the new products that was introduced by the insurance companies in the recent decades. Just like life insurance, the term insurance also assures financial cover during emergencies. However, it has some terms and conditions which are a bit different from its widely known alternative. This brings us to the point, why is the premium for term insurance lower in comparison to other policies.

There are many reasons which can be attributed towards this beneficial difference but here are some of them.

  1. Lesser bifurcations: Investment based insurance policies have high premiums because of the various bifurcations involved. The premium you pay towards insurance in a normal policy is broken down into three parts i.e. cost of insurance, administrative charges and investment. Whereas, in term plans the bifurcation is done in two parts i.e. cost of insurance and administrative charges.
  1. Healthy Lifestyle: When you apply for a term insurance the insurance company often asks you for a fitness certificates. They also inquire about the leisure habits of the insured like smoking and drinking. As a physically fit person has low chances of contracting illnesses, the odds of him or her filing for insurance claims are less. The insurance companies also lower the premium for people who have a physically fit body and no minor disabilities.
  1. No Maturity Benefits: Life insurance policies offer returns on maturity thus they prove to be great option for investment. Term plans on the other hand provide full cover for a specified period and if there are emergencies the insured is paid the sum assured promptly.
  1. Duration of the policy: A basic term plan covers the insured for a specific period which referred to as ‘term’. The duration of your term plan can also have an impact on the premium amount. The relation between the premium and the duration is as such that if the duration of the policy increases the premium for it will also rise and if the duration is low the premium is lower too.
  1. Profession: To an extent your profession can also influence the premium amount for insurance. When approving the insurance policy of a person the companies make sure that the applicant is not involved in any hazardous profession. Insurance companies often reject the application of people working with transport, shipping, mining oil, gas, etc. as these are deemed as accident prone professions. While some companies approve the application, they simply increase the premium amount for insurance.

Premium plays an important role in keeping your policy active over the years and since it is a constant payment, paying it should not affect your budget. Since basic term insurance policies not cover critical illnesses you might be advised to add a rider to your policy which can increase the premium amount. To avoid such expenses, you can apply for Aegon Life’s iTerm Plus insurance plan which provides cover against 36 critical illnesses.

To avoid such expenses, you can apply for Aegon Life’s iTerm Plus insurance plan which provides cover against 36 critical illnesses.

iTerm Plus is a comprehensive online term plan where you can choose from a choice of four plan options which offer different in-built benefits like accidental death and critical illness. So, while you get no money back with iTerm Plus if things stay well through the entire term, it is the one plan that can assure your loved ones of adequate protection, if the worst were to happen.

To know about AegonLife’s life insurance products and ULIP plans visit our home page.

II/Sep 2018/4429


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