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Do Life Insurance Premiums Increase Every Year?

life insurances are susceptible to annual premium increases because of external and internal variables, but there is a reason why premium increases annually read on to know.

  • 4,128 Views | Updated on: May 17, 2024

A life insurance policy is a contract between the insurer and the primary where the insurance provider promises to pay a claim to the beneficiaries if the insured dies within the chosen term period. The policy remains active only if the insured pays life insurance premiums on time.

Since life insurance premium payment is a full-time financial responsibility, it’s critical to choose a premium structure that aligns with your financial goals. Although the benefits of the insurance are immense, the life insurance policy age limit is something worth taking note of. If you wish to acquire one, you may do so as early as the age of 18, and the life cover can be extended up to 75 years, depending on the insurance firm. Additionally, under whole life cover policies, the cover provided can be up to 99 years of age.

The fact that life insurance premiums are susceptible to a yearly increase is an intriguing feature of the policy that demands a comprehensive understanding of the underlying causes.

Reasons That Cause Insurance Premiums to Annually Hike

  • Increasing Age
  • As you become older, the likelihood of developing medical issues increases, which consequently impacts your risk profile - the higher the risk, the higher the premium. Therefore, from an individual point of view, the life insurance premium payment amount increases every year.

  • Medical Expenditures Are On a Rise
  • Medical sector expenses grow by 15% per year as a result of technical improvements in the healthcare sector and rising inflation. As a result, doctors are compensated more, medications become costlier, and testing and medical procedures become more complex and expensive. Due to such hikes, insurance companies raise life insurance premiums.

Policy Type and Life Insurance Premiums

  • Individual Life Insurance/Group Life Insurance
  • This is a form of life insurance policy in which just one individual pays the premium and is covered by the policy. Individual life insurance is distinct from group life insurance, which protects the loved ones of the policyholder or workers of an organisation. It generally aims to meet the financial obligations of the living spouse or other family members.

Premium:

The premium of individual life insurance is higher than group life insurance. In addition, because the risk is contained to a single individual, the insured is unable to benefit from the cost reductions associated with risk distribution across a group. It does, however, offer additional coverage and flexibility, letting policyholders select the coverage they desire.

  • Single Premium Life Insurance/Regular Premium Life Insurance
  • A single premium life insurance policy is one where you pay a flat amount of money is paid to the insurance in exchange for a death benefit that is assured to your loved ones when you pass away.

Premium

To completely fund the insurance policy, customers are charged in a single up-front life insurance premium payment format. However, many applicants cannot afford single premium life insurance since it needs a substantial quantity of money from the insured. For such individuals, there are other options for premium payments such as monthly, quarterly, bi-annually, etc.

Like other types of insurance, life insurances are susceptible to annual premium increases as a result of external and internal variables. Nevertheless, this does not deter people from getting insurance because the policy providers offer multiple benefits and empower them to customise their policy’s terms and conditions to suit their needs. With a thorough understanding of the terms and conditions of the policy, you can avail multiple benefits and ensure a peaceful life for your family.

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

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