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How to Calculate Term Insurance Premium?

term plan policy is a must-have financial tool. It can offer you peace of mind and your family the means to continue their life as before, even in your absence. It is also an affordable instrument compared to other types of insurance products. This is primarily because term insurance is a pure protection plan that offers life protection during the policy term. However, it is still essential to understand how your premium is calculated, irrespective of how affordable it may be. This will help you plan your expenses and cater to your other financial needs well.

Let us understand some factors that affect your premium calculation

  • Your sum assured:

    The premium amount is directly proportional to the sum assured. A high sum assured will contribute to a higher premium amount.
  • Policy term:

    The term of the policy or the number of years the policy offers you coverage will also have an effect on the premium amount. Longer the term higher is the premium.
  • Premium payment term:

    Most policies offer the flexibility to choose the premium paying term from pre-decided options as per the terms and conditions of the plan. To give an example of this, for a policy with a term of 20 years, the terms and conditions may offer a choice to pay premiums for a period of 5 years, 7 years or maybe even the entire term of 20 years. As a thumb rule, shorter the premium payment term, higher will be the installment premium for the policy. However, the total premium amount paid for the entire policy will be less than a regular pay policy. Do keep in mind, that some insurance companies tend to offer discounts on shorter payment terms.
  • Your age:

    The older you are, the higher would be the premium for your term plan policy. Age is one of the major factors in deciding the premium as it can impact your health. As you get older, your body is more prone to falling ill. As a result, insurance companies charge a higher premium to cover the increased possibility of making a claim. If you want to get a lower premium, you should consider buying a term insurance plan early in life.
  • Your lifestyle habits:

    Just like age, your lifestyle habits can also influence your health and longevity. Regular smokers and drinkers often suffer from chronic illnesses that can put their health at risk. In addition to this, a history of substance abuse and drugs also adds to poor health. You will likely pay a higher premium if you have any of these habits. Therefore, it is highly advised to maintain a healthy lifestyle. Having said that, if you do have these habits, you should disclose the same to your insurer, as non-disclosure of this information can lead to unfavorable consequences later.
  • Your policy add-ons:

    Optional riders can enhance your term plan’s coverage with a marginal added cost. Riders include accidental death benefit, permanent disability benefit, critical illness coverage that add more value to the overall protection of your insurance policy.
  • Your gender:

    Many studies show that women are more likely to outlive men. As a result, women may have lower premium rates than men.


To sum it up

Calculating your premium is simpleMake sure that you factor in a good term plan into your budget without any hassles.

To seek a detailed understanding of Term Insurance Plans, please click here and enter your details.

Our expert financial advisor will get in touch with you soon after.


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