Are you the sole earning member of your family? Are you worried about financially securing the future of your loved ones? If yes, then you must consider buying a life insurance policy.

Life insurance policies are a financial contract between an insurance company and the policyholder. Under this contract, the policy buyer pays regular premiums, which guarantee that a lump-sum amount is paid to the beneficiaries in case of the policyholder's sudden demise.

Read on to learn about the factors affecting life insurance policy premiums, their importance, and their subtypes.

Importance of Life Insurance Policy

Life insurance plans are essential to safeguard the financial interests of your loved ones in the face of any unforeseen incident. As the world becomes more unpredictable, securing the future of loved ones becomes an essential responsibility.

So, here are some reasons why investing in a life insurance plan is important.

1. Protect the Financial Obligations of Your Family

Life insurance can help your family pay off debts, manage day-to-day expenses, and bear the higher education cost of children in your absence.

 2. Safeguard Your Assets

With the right life insurance plans, you can safeguard your assets for your family members in your absence.

3. Save Taxes

As per the Income Tax Act of India, the life insurance premium is eligible for an income tax deduction of up to Rs 1.5 lakh under Section 80C. Besides, Section 80D of the IT Act facilitates income tax deduction for insurance policy maintenance, which also applies to the riders included in the policy.

Types of Life Insurance Plans

You are still looking for options if you purchase a life insurance policy. Here are some of the popular ones.

1. Whole Life Insurance Plans: These plans offer coverage for 99 to 100 years. This prolonged coverage period safeguards your financial interests for the longest possible time and guarantees a return.
2. Term Plans: In the case of term insurance plans, you pay the premium for a specific period. And, if something happens to you during that period, the nominee will receive a lump-sum amount. However, if you survive the term, there are no benefits.
3. Endowment Plans: An endowment plan offers dual benefits. It has the advantage of life insurance, where the beneficiary receives a death benefit in case of any unfortunate incident. At the same time, you are guaranteed to get a return on the plan’s maturity if you survive the term.
4. ULIP: Unit Linked Insurance Plans or ULIPs also offer the dual advantage of investment and insurance. The premium amount you pay in a ULIP is allocated into two parts: one part goes into the investment through market-linked avenues, and the other goes into insurance.
5. Pension or Retirement Plans: They mainly focus on creating a corpus for non-working days. Along with the long-term investment horizon, they also safeguard the financial interest of your family by offering death benefits.
6. Money-back Policy: In the case of money-back policies, you receive a percentage of the life coverage at a regular interval. At the same time, these policies also offer survival benefits during the term. Additionally, if you live beyond the term, you receive the remaining corpus with an accumulated bonus.

Factors Affecting Life Insurance Premium

Here is a list of 10 factors that affect your life insurance premium.

1. Age: Since age reflects your life expectancy, starting a life insurance policy earlier will lower the premium amount as you will pay premiums for a longer period.
2. Coverage: The coverage amount is a key factor here. If you opt for a small coverage amount, the premium will be lower as higher coverage foists more risk on the insurance provider.
3. Criminal Records: Individuals with criminal records are viewed as high-risk candidates, which leads to a significant increase in premiums and, in some cases, application rejection.
4. Driving Record: A poor driving record portrays a person as a high-risk-taking individual, which prompts the insurance company to increase the premium.
5. Family’s Medical History: If your family’s medical history includes a genetic predisposition to certain diseases, then it will reflect on your insurance premium. Such conditions will increase the insurance premium amount considerably.
6. Gender: Studies show that women pay lower insurance premiums than men because they live longer.
7. Current Health Condition: Your current health condition is vital in deciding the insurance premium. Pre-existing conditions and overall poor health make you more vulnerable, which raises the premium amount.
8. Occupation: If you are involved in risky occupations where you are likely to face life-threatening situations, such as construction, police and fire fighting, the insurance premium will be higher.  
9. Smoking: The habit of smoking leads to various health conditions, increasing the insurance premium.
10. Recent Financial Issues: Financial history reflects the policyholder’s ability to pay the premium on time. So, a torrid financial situation means a higher premium due to non-payment risk.

How to Save Money on Life Insurance Online?

Here are some tips for saving money when buying life insurance online.

• Apply early
• Improve your health condition
• Quit smoking
• Opt for an annual premium rather than monthly ones
• Compare between policy providers

Life insurance plans play a key role in ensuring your family's financial security. Therefore, understanding the primary factors affecting your life insurance premium and exploring various options will help you make a knowledgeable decision.