Most of us know that life insurance premium is the price paid for buying an insurance cover. It could be a one-time charge, yearly, half-yearly or monthly payment. Depending upon the type of policy you choose you will have to make the premium payments, in order to keep your policy activated. But there are several premium related aspects that are less understood. What determines discounts offered on life insurance premiums? What are the different types of life insurance premiums, payment frequency, and tax benefits, etc? Basic knowledge of these is necessary to be able to choose and maintain your life insurance policy.

An insurance policy is a contract between the insurance company and the insured who promises to pay a certain amount as a premium to the company and the company in returns commitments to pay the cover amount to the beneficiary in case of any mishap and there is a loss of life.

Premium varies across plans, policy terms, sum assured and the age of the insured person. The mode of premium payment depends on the type of policy chosen and the payment option that company offers to you. While determining the insurance premium for your plan, the insurance company takes various factors into consideration like age, lifestyle, profession, tenure, profession, etc. A general thumb rule is higher the risk, more would be the premium costs.

Factors to determine life insurance premium:

Mode of premium payment

Ideally, when an individual chooses monthly payment it incurs extra administrative costs. So the best way is to choose the annual mode of payment that will reduce the premium costs. The additional charge increases cost thus ultimately increasing your premium amount.

Start Early

Being an early bird lets you cut down the costs on premiums to great extent. At a younger age, you’re medically fit & physically sound. So, it bounds to offer high premium at reduced costs.


The longer the policy tenure, lower will be the premium. Therefore, opt for longer duration policies as it allows you to build the required corpus for smaller premiums.

Rider Optional

Riders may give you additional benefit but they come with higher charges and increase your premium costs. You can lower the premium costs by opting for those riders that you actually need.

Stay fit

Healthy staying means lesser problems. People who tend to smoke or drink will have a riskier lifestyle. Companies will bound to increase the life insurance premium costs. So, staying fit is the key for a lower insurance premium.


Many industries like oil & gas, fisheries, mining, firefighting, etc. have risky working conditions. So, if you’re associated with any such profession, your life insurance premium will be higher than normal working conditions people in a corporate set-up.

Type of policy

Group insurance plans are always beneficial for the company as well as the policyholder. In a larger group, the policy risk is uniformly spread across, that minimizes the chances of loss for the insurance company and ensure more security to the policyholder. what is life insurance Hence, the life insurance premium is always lower when compared to an individual plan.

At the time of premium payment, most policy contracts provide for a ‘grace period’, which gives the policy holder an additional period of time after the due date for the paying the premium. During this period, he or she can pay the premium without any extra charges and the policy will still continue to be in force.

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