Annual Income is a Key Factor While Buying Term Life Insurance

Purchasing term life insurance is especially vital if you are the sole breadwinner in the household. It compensates your family for any revenue loss that may occur due to your early demise. Therefore, life insurance is considered income replacement. Here, the insurer needs to know how much you make so that the coverage you’re getting corresponds to the income that would be replaced as a death benefit if you died. Following are the prerequisites you need to consider when taking a term life insurance policy.

  • Revenue credentials are required since they demonstrate your willingness to pay the premiums on time. 
  • When you apply for coverage, the insurance company will need to know your financial condition in order to analyze your earning ability, financial earnings estimates, and whether or not you will be able to pay the premiums. 

This is why insurers favor salaried persons since they have a consistent income and are less likely to delay premium payments. Other factors, such as the years of experience and classification, also matter, particularly if you work in a high-risk position. This is predicated on the notion that as one gains seniority and expertise, the quantity of manual labor and exposure to hazards decreases.

Furthermore, your financial data assist the insurer in determining the sum assured or total life coverage that may be supplied to you. It eliminates the danger of over-insurance, which occurs when a policyholder purchases more coverage than the actual cash worth. This might pose a risk to the insurer and lead to the rejection of an insurance claim. If there is an error in the income statement, the policy may lapse, and an insurance claim may be refused. As a result, presenting income evidence while acquiring term insurance protects your beneficiary against a policy claim denial.

Factors affecting your Term Life Insurance Premium   

The following are the primary elements that influence your term insurance premium:

Your Age 

Age is a crucial element in determining the premium for life insurance. The population is divided into age groups with similar death rates by life insurers. The mortality rate, in turn, determines the amount of premium you must pay for your life insurance.

Because the mortality rate rises with age, the older you are, the higher your term life insurance premium. That is why purchasing term insurance early in life saves you money in the long run.


Gender factors are also related to the mortality of us. Women, in general, have a longer lifespan across age groups. Thus, if you are a lady, your term insurance premium is likely lower than men in the same age group.

Health & Lifestyle

Cigarettes, the use of other tobacco products, and the consumption of liquor all have an impact on your average lifespan and, as a result, your term insurance premium. So, living a healthy lifestyle will not only make you happier, but it will also save you money on insurance. Likewise, your current health issues or your family’s medical history influence your life insurance premium. Diabetes is a prevalent health problem that can lead to a variety of other ailments in the future.

If you have a pre-existing health issue, your term insurance premium may be higher. But, if the illness is unpredictable, the insurer may still give coverage after eliminating mortality as a result of the health condition.

The area you live 

The rates of mortality may vary by region. If the variance is significant enough, it may have an influence on the life insurance prices in that location. As a result, regional prices are immediately reflected in the total life insurance premium. If your home is in a severe earthquake area or is prone to flooding or storm surges, your life insurance premium will most certainly be higher.

Your employment

On several levels, your employment influences your social surroundings and wellness. Some jobs are more physically demanding than others. Physically challenging occupations may result in varying lifespans across age categories.

Extra benefits you may get to term insurance policy

You may get a variety of extra perks to your term insurance policy. Some of the essential additional perks are:

Accidental Death Benefit: In the event of accidental death, the spouses must pay extra money to cover legal and medical expenses. As a result, an additional quantity of money as a claim benefit assists the family in recovering these expenditures. 

Accidental Death and Disability rider Benefit: This is a critical feature to have in your term insurance policy. You may add this perk to your insurance in two ways: 1. securing a premium waiver, or 2. paying a lump payment in the event of incapacity.

Coverage For Serious Conditions: Some diseases, such as cancer and cardiovascular failure, are unexpected in their progression, therapies, and consequences. Furthermore, the treatment for such disorders might be prohibitively expensive. As a result, having insurance that will give financial support in the event of a diagnosis of any of these disorders may be beneficial.

Other factors that can increase the premium

At the same time, you can select a different plan choice that includes any of the following benefits, which may raise your premium:

  • Term plan with premium repayment: If you complete the insurance term, you will get a refund of all premiums paid.
  • Whole life term plan: Because of the longer policy term, the premium for a whole life term plan is greater. This plan will continue until the insured reaches the age of 99 or dies.
  • Policy Term: The policy term is a crucial consideration in calculating premiums. A level premium is typically charged for life insurance plans that is applied throughout the policy duration. This premium applies regardless of your age at the time the insurance is activated.

The longer you want the coverage to last, the more premiums from previous years will be carried over to your current year. As a result, your premiums will be constant for the duration of the insurance. There are a number of other factors that may cause you to pay a larger premium.

Bottom Line

Because term life insurance is indeed a need in your financial future, you must strive for the lowest feasible cost while ensuring coverage. The aforementioned factors influence your term insurance premiums. While some of these characteristics will apply only to you, others will apply to the entire group.