Role of Hobbies in Calculating Term Insurance Premiums

When deciding to take term insurance, you must know that there are multiple factors on which your premiums are calculated. Believe it or not, your hobbies also come into play in premium calculation. Keep reading to learn why insurers care about your hobbies and what you need to know before buying term insurance.

When deciding to take term insurance, you must know that there are multiple factors on which your premiums are calculated. Believe it or not, your hobbies also come into play in premium calculation. Keep reading to...
When deciding to take term insurance, you must know that there are multiple...

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What is Term Insurance?

Term life insurance provides financial protection for a specific period, typically 10 to 30 years or more. Upon the policyholder's death within the term, the insurance company pays the benefit (sum assured) to the beneficiary. The coverage automatically ends without a payout if the policyholder survives the term.

Critical Factors That Determine Term Life Insurance Premiums

As mentioned above, several factors come into play while determining term plan premiums, and knowing these factors will help you make informed decisions.

Age 

Your age is the most significant influencer in your life insurance premium. Generally, the younger you are, the cheaper your premium will be. This is simply because younger people tend to be healthier and live longer than older people, making them less of a risk to insurers.

Health Status

Current health and medical history are significant factors in any premium calculation. Issues considered by insurers may include chronic illnesses like diabetes and heart disease, body mass index (BMI), and family medical history.

Lifestyle Choices 

Lifestyle choices that impact greatly on your life insurance premium include the following:

  • Smoking: Smokers have higher life insurance premiums because they are risky to their health.
  • Consumption of Alcohol: Heavy drinking would enhance your premiums. However, moderate consumption may have less of an impact.

Hobbies 

Your hobbies are also considered while calculating life insurance premiums. Insurers assess the riskiness of your hobbies. Engaging in activities like skydiving, scuba diving, or any other extreme sports would command higher premiums. In contrast, running or hiking can improve your fitness, which might help you establish a healthy profile and fetch lower premiums.

Occupation

Your occupation also determines your life insurance premium. High-risk occupations like construction workers or pilots often result in higher premium quotes due to the greater chances of accidents or injury. Conversely, jobs with low profiles typically pay lower premiums.

Coverage Amount and Duration 

The amount of coverage you select and the term length will also determine your premium costs. Higher coverage amounts will increase your premiums, while shorter terms can lower costs.

Gender 

It is a statistical fact that women tend to live longer than men. Thus, they usually receive lower premiums. Insurers consider gender when calculating risks and setting rates.

Type of Policy

The type of policy you choose determines your premiums. Term life insurance is generally cheaper than whole life insurance because it only covers a specific period. Typically, whole-life policies are more expensive and include an element of savings.

Riders and Additional Benefits 

Some riders or other benefits you add to your term life insurance plan might make you pay more. Some essential riders include critical illness coverage, accidental death benefits, or waiver of premium.

Understanding High-Risk Hobbies in Term Insurance

Here’s a list of high-risk hobbies in term insurance:

Skydiving

Jumping from an aeroplane involves risks and accidents during free fall and landing.

Rock Climbing 

Climbing on either natural rocks or artificial walls, this sport requires strength and agility, teamwork, and more. Falls and gear failure can cause serious injuries.

Scuba Diving

Diving underwater poses risks, including the dangers of deep water and possible health complications. The risk of decompression sickness will rise with deeper dives.

Motor Racing 

Raced at high speed in competition, thus raising the chance of a crash and serious injury. In high risks, they can escalate within a split second to life-threatening moments.

Bungee Jumping 

Jumping from great heights attached to an elastic cord with great chances of failure in equipment.
Other high-risk hobbies include sky surfing, hang gliding, paragliding, whitewater rafting, and caving/spelunking.

What Happens if You Don’t Disclose High-Risk Hobbies?

If you don't disclose certain high-risk hobbies during the term life insurance application process, you could face severe consequences: Here's how things might go:

Policy Denial

If you are involved in a high-risk hobby that was not disclosed to the insurance provider, resulting in an incident and claims, the insurer might deny the claim. This could leave your beneficiaries without the financial support you intended to provide.

Cancellation of Policy

Insurers inquire about claims regularly and may find high-risk hobbies you failed to disclose. If they find that it was misrepresented or omitted, they can cancel the policy, leaving you without coverage and losing all your premiums paid.

Higher Premiums

If you engage in risky hobbies like skydiving, motor racing, etc., you should not hide this from your insurer. They may initially give you a lower premium based on what they think your risk level is. But once they know of these hobbies, they will re-evaluate your new risk and increase the premium.

Impact on Future Insurance

A denial or cancellation due to non-disclosure can hurt your ability to get insurance in the future. The insurers might consider your history unfavourable, charge you more, or make getting new insurance difficult.

Importance of Knowing Inclusions and Exclusions in Term Plans for People With High-Risk Hobbies

Knowing what is included or excluded in your term life insurance policy becomes important for people with high-risk hobbies. Here's why:

Understand Your Coverage

You should know what is covered and what is not in the policy. Some insurers might deny paying out if your death was due to a high-risk activity. Knowing these will ensure you have the correct coverage for your lifestyle.

Avoid Surprises

The last thing you would want your family to face under stressful circumstances is financial distress because your policy did not consider the circumstances you found yourself in. Knowing the exclusions prevents unwanted surprises when making a claim.

Informed Decisions

Knowing the exclusions regarding high-risk hobbies will make you think twice before engaging in some activities or taking more precautions. This can help you better manage your risks and protect your policy in the long run.

Peace of Mind

Being informed about your policy gives you peace of mind. You’ll feel more secure knowing you’ve chosen a plan that adequately covers your needs and family. 

Explore Term Insurance Option From ACKO

ACKO Life Flexi Term Plan is a modern, highly flexible, customer-centric solution for long-term financial protection. This unique plan allows seamless modifications to both the Coverage Amount (Sum Assured) and Policy Duration. This means you can easily increase or decrease your coverage based on your evolving life circumstances, such as marriage, buying a house, or having children.

Besides, ACKO offers a fully digital policy management system. Policyholders can easily make any policy adjustments (endorsements) such as:

  • Changing personal details (address, phone number)
  • Adjusting the Sum Assured or Policy Term
  • Adding or modifying riders
  • Updating nominee details and payout modes
  • Raising claims—all via the mobile ACKO App.

Conclusion

Several factors indeed play a crucial role in estimating your term life insurance premiums. Among these factors, hobbies are one of the critical elements insurers consider. So, if you are planning to purchase a term plan, understanding how hobbies impact the calculation of term insurance premiums is crucial. Remember that engaging in riskier hobbies leads to higher term insurance premiums.

Frequently Asked Questions

Not all hobbies impact your premiums. Low-risk hobbies typically do not affect your rates.

Hobbies like skydiving, scuba diving, and extreme sports are generally viewed as high-risk.

Most insurers ask about hobbies when making an underwriting decision.

Failing to disclose a high-risk hobby can lead to several consequences, including claims denial in the future.

During underwriting, insurers may perform background checks or ask for detailed descriptions of your hobbies.

You can always talk about your lifestyle with your insurer, but the chance of getting a better premium deal is generally tied to risk factors and company policies.

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Written by Neviya Laishram

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Reviewed by Vaibhav Kumar Kaushik Author info Icon

A professional Life Insurance writer, editor, and copywriter with a background in magazines, healthcare, education, and insurance.

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