The Role of Gender in Term Insurance Premium Calculations

Risk-Based Pricing Structure

Insurance companies adopt a risk-based pricing structure when evaluating appropriate premiums for term insurance policies. This means the policy risk is assessed, and the price is set based on these risks. As a rule of thumb, the higher the risk, the higher the premium. While several factors influence the risk associated with policies, some of the most common factors are age, medical history, occupation, underlying medical condition, income, and a person's overall health.

One major factor that insurance companies consider is the gender of the person. Also popular known as "Gender Rating," this practice means that in the eyes of insurance companies, both genders are not the same.

Why Does Gender Rating Exist?

In the realm of insurance, gender rating does exist. And While this may sound discriminatory and unfair against men, gender rating is strongly backed by science. The reason that females are offered more competitive rates than males is that females generally have a lower risk profile on average as compared to males, and here is why:

Longer Life Expectancy

When it comes to life expectancy, females, on average, live longer than men by five years. Having a longer life expectancy, which is half a decade, puts females far lower on the risk chart than men, bagging the lower premiums.

Different Healthcare Needs

Females and males have different needs regarding healthcare and medical treatments. Women are more likely to seek preventive care, attend regular check-ups, and detect health issues early, leading to better long-term outcomes. In contrast, men often delay medical visits, increasing the risk of late-stage diagnoses for critical conditions like heart disease. These factors contribute to a lower overall risk profile for women, which insurers consider when determining term insurance premiums, resulting in lower costs for female policyholders.

Less Prone To Chronic Diseases

It has been discovered that females are far less likely to suffer from chronic diseases or heart conditions as compared to males. Regarding a term insurance policy, they are also less likely to file a claim for these issues. It makes them a better customer base as compared to the males, who suffer significantly more from chronic diseases and heart conditions.

Lead Better Lifestyle

Regarding leading a healthy lifestyle, men are far behind in the race compared to females. Men are more likely to engage in life-threatening activities like drinking or smoking in excess, consuming high quantities of tobacco, using psychoactive substances, rash driving, consuming less healthily than women do, etc.

These lifestyle choices put them at a higher risk of cardiovascular diseases, lung cancer, liver cirrhosis, and accident fatalities, significantly increasing their term insurance premium.

What Does Gender Rating Look Like?

The first and foremost impact of gender rating is that, based on gender, females are offered comparatively lower premiums than men. But is that all? Is a lower premium the only upside females tend to enjoy in the insurance industry. Or does the gender rating have more to offer females than males?

Women-Centric Plans

Beyond the lower premium rates compared to females, gender rating can also be seen in women-centric plans. As discussed above, females have different needs when it comes to healthcare and medical treatment. Therefore, insurance companies offer policies that aim to address the specific needs of females, ensuring that they get comprehensive coverage to suit their needs.

Additional Benefits Like Maternity Insurance

Life insurance companies have also started to offer special additional benefits or riders tailored to fit female needs. One such rider or additional benefit is maternity insurance. It is offered to support women during pregnancy and childbirth and covers expenses related to prenatal care, hospital stays, delivery costs, and postnatal care, easing the financial burden on expecting mothers. Some policies also include coverage for newborn care and complications arising during childbirth.

Frequently Asked Questions

Do females enjoy critical illness coverage for medical emergencies?

Yes, females enjoy critical illness coverage for medical emergencies in general and women-centric term insurance policies.

Do females lose on tax benefits due to gender rating and lower premiums?

No, females do not lose tax benefits due to lower premiums. The tax deductions under Section 80C of the Income Tax Act apply to the premium paid, regardless of the amount. Women still enjoy the same tax-saving advantages as male policyholders.

Are the policies comprehensive enough, or do the benefits reflect the lower premiums as lower benefits?

Women-centric term insurance policies are designed to be comprehensive, offering essential coverage like critical illness riders, maternity benefits, and health check-ups. Lower premiums do not necessarily mean reduced benefits; they reflect lower actuarial risk, ensuring women receive competitive coverage without compromising essential policy features.