How is death benefit insurance premium determined

Term life insurance is an insurance policy you should consider anyway if you want to give your dependents a financial cushion after your death. After all, with such insurance, you build up an insured amount during your lifetime by paying a premium each month. This premium eventually results in a large insured amount, which your family can use as financial support.

One of the most important things to consider when buying term life insurance is the amount of premium you pay. This is because it depends on a number of factors.

The main premium determinants in whole life insurance

1. The insured amount

First, there is the insured amount itself, in other words the amount your next of kin will receive after your death. Obviously, you will pay more monthly premium to your insurer if this amount is higher. The advantage then, of course, is that your family will have an extra large financial buffer at their disposal.

2. The term or period of validity of insurance.

The term of validity of the death benefit insurance also plays a role in determining the premium. Generally, a longer insurance policy entails more financial risk for the insurer, so the monthly costs are slightly higher in this case. As a policyholder, in most cases you do have the freedom to determine the period of validity yourself.

3. The age of the policyholder

The older you are, the higher the premium for your term life insurance. This makes sense, since older people are at a higher risk of dying. If you want to save a lot of monthly expenses, then it definitely pays to take out death benefit insurance as early as possible. That way, you pay only 5 or 6 euros per month.

4. The insured's health and smoking habits.

With any life insurance policy, including term life insurance, the worse the health of the policyholder, the higher the monthly premium. This, of course, is because people who suffer from certain (chronic) conditions or ailments are more likely to die.

With term life insurance, smoking behavior weighs extra heavily in determining the monthly premium. After all, smokers are at a much higher risk of developing chronic diseases and also generally die earlier.

5. The sex of the insured person

With quite a few insurers, the gender of the policyholder also plays an important role in determining the premium to be paid. This is due to the fact that women generally live longer than men. The risk of death is lower, so women therefore pay somewhat less for the premium of their term life insurance.

6. The type of term life insurance

Finally, the premium you pay for your term life insurance will be largely determined by the type of term life insurance you choose. We can distinguish three forms:

The equal death benefit insurance policy

With this insurance, as a policyholder, you pay the same amount every month and every year. Therefore, this is the best solution for policyholders who want to pay a stable monthly cost.

The linear decreasing life insurance policy

Linearly decreasing insurance means that the premium gets lower and lower, which is of course financially interesting in the short term. In the long run, the downside is then that the final amount paid out will be lower.

The annuitizing term life insurance policy

Finally, there is annuity declining insurance, where the premium decreases by a certain percentage each year. In this case, the insurance costs less than the constant insurance, but still slightly more than the linear declining insurance.