How Life Insurance Premiums Work (and What Affects Them)

Everyone who has bought a life insurance policy would know what a “premium” is. It’s basically the price we pay to keep our insurance policy active. This is a fee that we give for protection whether it’s our health, our car, or our family’s future.

How does it work?

An insurance policy is like a contract. The premium of any life insurance policy depends on the sum assured and can be paid monthly, half-yearly, quarterly or annually yearly, as per your choice, and in return, the company from where you have bought the policy promises to cover you against certain risks. If you stop paying your premiums, the contract breaks, so to continue staying protected, make sure you pay your premiums regularly.

Let’s see how is premium calculated

While it may feel a bit tricky, it actually isn’t. Life insurance companies do not pick random amounts, they carefully evaluate the following:

• Age and health (younger, healthier people usually pay less for life and health insurance).
• Lifestyle habits (smoking, for instance, makes the cost go up).
• Coverage amount (a higher sum assured = a higher premium).
• Policy term (longer commitments often mean more favourable rates).

Not to forget the actuaries who work behind the scenes to crunch data, study risks, and use statistics to decide what’s fair for both – the customer and the insurer.

For example, RNL’s Super Suraksha Term Plans are one of the most affordable ways to secure your family's future. You pay a relatively low premium for a high sum assured, offering peace of mind that your loved ones will be financially protected. [Calculate your premium now]

Who are Actuaries?

They are known as the math wizards They analyse risks, mortality rates, and economic trends to ensure that your premiums are set at the right level - not too high for customers, but sustainable for the insurer.

What are the different kinds of premiums?

1.Regular premium – Paying throughout the policy term.

2.Single premium – One lump sum amount paid upfront. 

3.Limited premium – Paid only for a fixed period, but cover continues even after premium payments stop.

RNL Super Suraksha Term Plans, for instance, offer flexibility — you can choose to pay regular premiums or opt for limited premium payment terms, depending on your financial comfort. To know more about the plans, click here.

What are the things to be kept in mind before buying a life insurance policy?

It’s not just about the premium amount, it’s about asking these questions to yourself:

• Will this coverage be enough for my family?
• Can I comfortably afford the premium payments every year?
• Does the policy fit into my bigger financial plan?

What are the factors that can affect premiums?

Your premium is a reflection of your risk profile. Age, medical history, family health background, smoking/drinking habits, even your profession can influence the amount. For eg: a pilot pays more premium than a teacher.

How do you decide the final premium?

Premium is based on the foundation of two pillars – risk and coverage. A high-risk individual will have a higher premium or if you want broader coverage, again, your premium will be more.

If you're looking for a straightforward, high-cover option that fits seamlessly into your long-term financial goals, a term insurance plan might be ideal. RNL Super Suraksha Term Plans are designed to provide maximum coverage at a pocket-friendly premium.

How can premiums be paid? 

Most insurers offer multiple options – online payments, auto-debit from your bank, cheques, or even mobile wallets. Consistency is what matters. Missing payments could lapse the policy.

What happens to this premium payment? 

This is one of the most commonly asked questions — and rightfully so. When you pay your premium, you're not just covering a cost; you're contributing to a system designed to protect human lives and futures. Here's how your premium helps:

• Creates a financial safety net to ensure that future claims can be paid when families need support the most.
• Supports the operational efficiency required to process claims quickly and fairly.
• Is invested responsibly (in instruments like government bonds) to ensure long-term stability and sustainability of the protection being offered.

FAQs

Can my premium change over time?

Yes. For some policies (like health insurance), premiums may rise with age or inflation.

Can I reduce my premium?

Choosing a longer policy term, quitting smoking, or opting for higher deductibles can lower costs.

Why is my premium different from my friend’s?

Every person has an individual risk profile which may be similar but not same as each other. There are a lot of things that play a role in determining your premium such as age, health, and lifestyle to name a few.

*T&C Apply

Mktg/RNLIC/blog_LIpremiums/V1/Sep25

RNL Super Suraksha Term Plans – These feature two products RNL Super Suraksha Elite, a non-linked non-participating individual pure risk /savings Life Insurance Plan (UIN: 121N148V01) & RNL Super Suraksha Plus, a non-linked non-participating individual pure risk /savings Life Insurance Plan (UIN: 121N149V01).

Visit Us: https://www.reliancenipponlife.com/

Disclaimer: https://bit.ly/3J4dvxK

7 Views