The Cost of Term Insurance: What Determines Your Premium

When it comes to securing your family’s financial future, a term insurance plan stands out as one of the most affordable and practical options available. It offers high coverage at comparatively low premiums, ensuring your loved ones remain financially secure even in your absence. But have you ever wondered what determines the cost of your term insurance premium? Why do two people of the same age sometimes pay different amounts?

In this post, we’ll decode what affects your term insurance premium, how you can make informed decisions, and how a well-chosen plan can even help you save on taxes.

What is a Term Insurance Plan?

A term insurance plan is a type of life insurance that offers pure protection. You pay a regular premium for a chosen policy term, and if you pass away during this period, your nominee receives a lump sum amount known as the "sum assured." It’s a simple concept with a single goal—financial protection for your family in your absence.

Factors That Determine Your Term Insurance Premium

1. Age

The younger you are when you buy a policy, the lower your premium. Insurance companies consider age to be directly proportional to health risk. So, buying early means locking in lower premiums for a long time.

2. Lifestyle Habits

Whether you smoke or consume alcohol, it significantly impacts your premium. Non-smokers and individuals with a healthy lifestyle get preferential rates.

3. Medical History

If you have pre-existing health conditions or a family history of chronic illnesses, insurers may charge a higher premium. A medical test may be required before approving the policy.

4. Coverage Amount

Naturally, a higher sum assured comes with a higher premium. However, even large coverage under a term insurance plan is often affordable compared to other types of life insurance.

5. Policy Term

A longer policy term may slightly increase your overall premium, but it also provides extended protection, making it worthwhile in the long run.

6. Premium Payment Term

You can choose to pay premiums monthly, quarterly, half-yearly, yearly, or as a single premium. Spreading payments over a longer time period can make them more manageable.

7. Riders or Add-Ons

Adding features like critical illness coverage or accidental death benefits increases the premium slightly but provides more comprehensive protection.

How Tax Savings Reduce the Cost of Term Insurance

One of the underrated benefits of buying a term insurance plan is the tax advantage it brings under Section 80C of the Income Tax Act, 1961. Premiums paid towards your term insurance policy are eligible for a deduction up to Rs. 1.5 lakh annually. This not only reduces your taxable income but also increases your overall take-home salary.

Let’s understand this with an example:

Without a Term Insurance Plan

• Person A's annual salary: Rs. 10,00,000
   
• Standard deductions and other exemptions: Rs. 50,000
   
• Taxable income: Rs. 9,50,000
   
• Tax (approximate as per current slab): Rs. 72,500
   
• Net income after tax: Rs. 9,27,500
   

With a Term Insurance Plan

Let’s say Person A purchases the Signature 3D Term Plan - Platinum from brands like Aviva with an annual premium of Rs. 50,000. This amount is eligible for deduction under Section 80C.

• Taxable income after insurance deduction: Rs. 9,00,000
   
• Tax (approximate): Rs. 62,500
   
• Net income after tax: Rs. 9,37,500
   

Tax saved: Rs. 10,000
 

Result: By investing in a term insurance plan, Person A not only ensures financial protection for the family but also increases their take-home income by saving on taxes.

How Signature 3D Term Plan - Platinum Offers Cost-Effective Protection

Let’s briefly consider why this plan is ideal for people looking for flexibility, affordability, and added benefits:

• Offers complete financial protection for your family.
   
• Choice between Life Protect (flat sum assured) and Credit Protect (reducing sum assured).
   
• Special premium rates for women and non-tobacco users.
   
• Additional protection with optional riders like Critical Illness, Accidental Casualty, and Cancer Cardio.
   
• Flexible premium payment modes – yearly, half-yearly, quarterly, monthly, or single payment.
   
• Offers life coverage up to 80 years of age.
   
• Option to buy the policy under the MWP Act to protect proceeds from claims.
   
• Tax benefits under Sections 80C and 10(10D) of the Income Tax Act.
   

The plan helps address not just death-related risks but also offers flexibility to adjust your plan as per your financial goals and life stage.

Conclusion

While price is an important factor, a term insurance plan is more than just a cost—it's a safety net for your loved ones. Understanding what affects your premium allows you to make informed decisions and plan for long-term savings, including tax benefits.

With proper planning, like opting for a plan with flexible benefits and tax deductions, you can make term insurance a cost-effective investment for today—and a lifeline for tomorrow.

Let your insurance plan be the silent promise you make today for the security of your family’s future.

*Standard T&C apply

*Tax benefit is subject to change as per tax laws

*Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read the sales brochure/policy wording carefully before concluding a sale.