Term insurance may become more expensive in the coming months. Whatever the reason for the hike in the rates of the term plans, one cannot do away without one, especially if one has the future of dependents to worry about.If you have an existing policy, the hike will not affect the premiums of the same. The premiums are set for the duration of the plan. It is the buyers of new policies who will find that premiums have increased.
Premiums for term insurance plans are expected to rise by up to 40% in the next three-six months as the companies take into consideration the emerging mortality experience.
Insurance companies such as ICICI Prudential Life Insurance Co. Ltd, HDFC Life Insurance Co. Ltd and Tata AIA Life Insurance Co. Ltd has already hiked premiums on term plans with effect from 10 April. Some players still seem to be still deliberating on whether to pass on the hike to the insurers.
Most experts believe that one must buy a term plan if one has dependents. The tragic consequences and likely damage that can be caused by the spread of the COVID-19 or coronavirus pandemic has helped people understand the importance of a term plan.
What determines a person's insurance premium?
- Buyer's age
- Type of coverage
- Amount of coverage
- Insurance history
- Family history
- Pre-existing diseases
- Lifestyle choices
If anything attributable to the buyer questions the underwriting process, the premium will be affected.
When it comes to life insurance, the underlying mortality rate plays an important role among other factors on deciding your premium. The underlying mortality rate is affected by several individual-specific factors like a smoking habit, occupation, alcohol consumption, pre-existing disease, riskier leisure pursuits, medical history of parents and siblings and even where (locality) you live.
The term insurance prices we have today are based on the LIC mortality tables as no other data was available. While working out the premium, the private insurers assumed that fewer deaths will occur than what the state insurer (LIC) believed. However, as per the latest data, it appears that the mortality rate is higher than what was used earlier to calculate the premiums. The base assumption on which the current premiums are based is now being challenged. As there has been a consistent rise in the incidence of claims, this has led to reinsurers. both Indian and global, taking a cautious stance as far as providing covers are concerned.
The term insurance prices we have today are based on the LIC mortality tables as no other data was available. While working out the premium, the private insurers assumed that fewer deaths will occur than what the state insurer (LIC) believed. However, as per the latest data, it appears that the mortality rate is higher than what was used earlier to calculate the premiums. The base assumption on which the current premiums are based is now being challenged. As there has been a consistent rise in the incidence of claims, this has led to reinsurers. both Indian and global, taking a cautious stance as far as providing covers are concerned.
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