There are reports about term insurance that there may be an increase in the premium of term insurance within the coming 90 days. This information is based on a study conducted in the last three months by a reinsurance company. Reinsurance is a company that covers the risks of other insurance companies. Hence, the Reinsurance Company along with insurance companies fix the cost of term insurance and life insurance plans. The study found a need to increase the premium for term insurance plans.
Term insurance is based on the concept that the mortality rate of customers taking term insurance will be 25% of the deaths in the average Indian population. Online term insurance prices are even cheaper than offline. Online prices are determined by considering the death rate of customers taking term insurance as 20% of the deaths in the average Indian population. While fixing prices online, mortality is considered low, so online term insurance plans are cheaper as compared to offline term insurance.
Along with this, there are many other benefits of taking an online plan. In today’s time, term insurance has become very important for the people, so through this article we are going to tell you why term insurance plans can be expensive.
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How the premium for term insurance is determined?
The premium for term insurance is calculated on the basis of several factors, which are –
- Gender – Women have lower average mortality rates than men. According to a recent study, women live about 5 years longer than men. This means that the risk of term insurance is lower for women as compared to men, hence the premium for term insurance is lower for women.
- Ages – As you get older, the term insurance premium also increases. The probability of death increases with age. Term insurance premiums remain largely unchanged until the age of 40 years. It grows every year after the age of 40.
- Period – Term insurance plans are usually for a particular time period. It can range from 10 years to 30 years. As the period increases, so does the price. This is because as the period progresses, you will become more old and you will also be more likely to have health problems.
- Mode – Payment modes can be monthly, quarterly, half-yearly or yearly. The premium also varies depending on it. Monthly installments are more expensive than annual payments. The payment you make is usually kept in the investment account, so that interest can be earned on it. The longer the premium paid by you will remain in the account, the more interest the company will get. In addition, on payment of several times a year, the insurance company has to bear more administrative expenses to process the payment.
- Rating Class – Each insurance company divides its customers into a pool based on risk. Each pool represents a square. Higher class rates are lower. It is based on medical history, family history, health status, your habits etc. These classes are often named Elite, Preferred, Standard, Standard Plus and Substandard. Rating classes may vary in different companies.
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Offline and online term plan pricing
Price determination – The insurance sector has also come down due to the increasing impact of e-commerce and the increasing trend of common people towards online purchases. Any applicant can deal directly with the insurer online. In this method there are no brokers or agents between the insurance company and the client. Due to this, online plans are cheaper than offline plans. All the benefits of the scheme are directly transferred to the customer. Online term insurance, on average, is 40% cheaper than its offline counterpart.
insured amount – The sum insured also changes in the online term plan. Through the medium of online customers are assured of a higher sum insured at a lower premium. Its coverage ranges from Rs 5 lakh to Rs 5 crore. Although similar facility plans are also available offline, customers prefer to take an online term plan due to lower premium and higher sum assured.
The Reinsurance Company has informed all insurance companies that the insurance premium may be revised in the near future. So if you are not insured and want to get it done in future, then this is the right time for you. Otherwise you will have to get insurance by paying higher premium. You can choose a good plan for yourself based on the features and premiums of different insurance companies as per your convenience.