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Term Insurance to Experience a Premium Hike Soon! Research Team | Posted On Friday, January 03,2020, 04:56 PM

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Term Insurance to Experience a Premium Hike Soon!



The latest news on term insurance says that term insurance premiums will be hiked within the next 90 days.

This is based on a study conducted by a senior reinsurer for the past three months. A reinsurer is a company that covers the risk faced by other insurance companies. Therefore, a reinsurer along with the insurance company decides the price of a term life insurance plan. There is a need to hike the premium of term insurance plans.

Term insurance is based on the concept that the mortality rate among subscribers of each segment would be 25% of the death experienced by the average Indian population. But as per insurance companies, online prices are cheaper based on the assumption of mortality rate among subscribers to be 20% of the death experienced by the average Indian population. This means as mortality rate decreases; prices offered will also decrease.

See Also: Term Insurance Plans with Return of Premium

Hence, online term insurance plans are cheaper than offline plans. They have the added advantage of lesser documentation, lower fees and so on.

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Term Insurance to Experience a Premium Hike Soon!

How are term insurance premiums decided?

Term insurance premiums are calculated based on a number of factors:

  • Gender: The average mortality rate is lower for women than men. According to a recent study, women live nearly 5 years more than men. This means the risk involved is also less. Hence, term insurance premiums are lower for females.
  • Age: Term insurance premiums increase as you get older. With age, the probability of death increases. Term insurance premiums remain pretty much unchanged until you hit the 40's. After the 40's it increases with each passing year.
  • Term: Term insurance plans are usually for a particular time period. This can range from 10 years to 30 years. As the term increases, so does the price. This is because, as the term increases, you would get older and face more health issues.
  • Mode: The payment mode can be monthly, quarterly, semi-annually or annually. Based on this, the premiums also vary. Monthly installments are costlier than annual payments. Your payments are usually saved in investment accounts to receive interest on the same. The longer your premiums are held, the more interest they gain. Also paying several times a year means administrative costs to process the payment would be higher for the insurance company.
  • Rating Class: Each insurance company will segment its customers in a pool; based on the risk involved. Each pool represents a class. Higher the class, the lower will be the rates. This is based on medical history, family history, health condition, habits and much more. These classes are often names as elite, preferred, standard, standard plus and substandard.
  • You always drive carefully and have no history of traffic offenses; you are likely to be in a preferred class. You eat healthily and have a healthy body mass index; you will be given an elite rating class. Rating class changes across companies.

See Also: Things About Term Insurance You Always Wanted to Know

Pricing: Offline v/s Online Term Plan

  • Pricing: With e-commerce flourishing, the insurance sector has also come of age. Online plans are those in which an applicant directly deals with the insurer to make a claim. There are no brokers or agents. This means online plans are way cheaper than offline plans. All the benefits of the plan are directly transferred to the customer. On average, online term insurance is 40% cheaper than it's the offline counterpart.
  • Sum Assured: The sum assured also changes with online term plans. Customers are assured a higher sum assured for a lower premium. Coverage ranges from Rs 5 Lakhs to Rs 5 Crore. All through these plans are available offline as well, customers opt for the online term plans as premiums are low.

See Also: 10 Best Things About Term Insurance


The reinsurers have notified all insurance companies that term insurance premiums will be revised in the near future. As reinsurers endure higher costs, they pass it on to insurance companies, which means term insurance premium hike. We can expect all top insurance companies to increase their premiums in the next 3 months.

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