Mortality Risk Calculator in Life Insurance: How it Works?

Home / Life Insurance / Calculators / Articles / Mortality Risk Calculator

When it comes to life insurance, choosing the right policy can be overwhelming. With so many options available, it's easy to get lost in the details. But don't worry, there's a tool that can help you navigate through the choices: the mortality risk calculator. In this article, we'll walk you through what it is, how it works, and why it's important when choosing a life insurance policy in India.

What is meant by mortality risk?

Mortality risk refers to the probability of an individual's death within a certain period of time. It is based on various factors such as age, gender, health condition, lifestyle habits, and occupation. In the context of life insurance, mortality risk plays a crucial role in determining the premium of a policy. The higher the mortality risk of an individual, the higher the premium of the policy.

What is a mortality risk calculator in Life Insurance?

A mortality risk calculator is a tool that helps you to calculate your mortality risk and choose the right life insurance policy for you. It is an online tool that takes into account various factors and calculates your mortality risk based on these factors.

You can use the results from the mortality risk calculator to compare different life insurance policies and choose the one that suits your needs and budget the best. The mortality risk calculator is a very useful tool for anyone who is looking to buy a life insurance policy in India.

How does the mortality risk calculator work in Life Insurance?

To use the mortality risk calculator, you need to provide some basic information about yourself such as your age, gender, occupation, income, lifestyle habits, and medical history. Based on this information, the calculator estimates your mortality risk and suggests the type and amount of coverage you need.

The mortality risk calculator in life insurance is an excellent tool to help you make an informed decision when choosing a life insurance policy. By using this calculator, you can ensure that you are adequately covered and paying a premium that reflects your risk profile.

Factors that affect mortality risk in India

Here is a list of factors that affect a person’s mortality risk.

Age

Age is one of the most significant factors that affect mortality risk. As a person ages, their body becomes more susceptible to illnesses and diseases, increasing their mortality risk. For instance, a person in their 20s has a lower mortality risk than a person in their 50s or 60s. Age is an essential consideration when calculating the premium for a life insurance policy.

Gender

Gender is another crucial factor that affects mortality risk. Women, on average, tend to live longer than men, which means they have a lower mortality risk. According to statistics, the life expectancy of women in India is higher than men. Therefore, women tend to get life insurance policies at a lower premium than men.

Health condition

The state of a person's health is a crucial factor that determines their mortality risk. Individuals with pre-existing medical conditions such as heart disease, diabetes, or cancer are at a higher risk of mortality. On the other hand, individuals who maintain a healthy lifestyle and have no underlying health conditions are at a lower risk of mortality.

Lifestyle habits

Unhealthy lifestyle habits such as smoking, excessive drinking, and lack of exercise can increase mortality risk. These habits can lead to health complications such as heart disease, stroke, and cancer, which can increase the risk of mortality. Individuals who lead a healthy lifestyle and exercise regularly have a lower mortality risk.

Occupation

Certain occupations can increase the risk of mortality. Jobs that involve exposure to hazardous substances, such as miners or construction workers, have a higher mortality risk. Similarly, firefighters and law enforcement personnel have a higher risk of mortality due to the nature of their job. These factors are taken into account when calculating the premium for a life insurance policy.

Geographical location

A mortality risk calculator also considers geographical location of an individual. For instance, individuals living in densely populated areas with poor air quality are at a higher risk of mortality due to exposure to pollution. Similarly, individuals living in areas with inadequate access to healthcare facilities are at a higher risk of mortality due to lack of medical attention.

Real-life example of the impact of mortality risk in life insurance

Let's consider two individuals, Ravi and Arjun, who are of different ages and have different mortality risks. Ravi is in his late 50s and is an IT consultant. He is married and has two children. He has a history of high blood pressure and has been taking medication for it for the past few years. He also has a sedentary lifestyle and rarely exercises.

On the other hand, Arjun is in his early 20s and is a recent college graduate. He is single and works as a software developer. He has no pre-existing medical conditions and leads a healthy lifestyle. He exercises regularly and doesn't smoke or drink.

Now, let's compare their mortality risk and the factors that their insurer will consider while issuing them a life insurance policy.

Age: Ravi's age puts him at a higher mortality risk compared to Arjun. As we age, our body becomes more susceptible to illnesses, diseases, and other health issues.
Gender: Both Ravi and Arjun are male, so there is no significant difference in terms of gender-based mortality risk.
Health condition: Ravi's high blood pressure puts him at a higher mortality risk compared to Arjun, who has no pre-existing medical conditions.
Lifestyle habits: Ravi's sedentary lifestyle puts him at a higher mortality risk compared to Arjun, who exercises regularly and leads a healthy lifestyle.
Occupation: Ravi and Arjun's occupation does not pose a significant risk to their mortality.

Based on the above factors, Ravi is at a higher mortality risk compared to Arjun. Therefore, Ravi's insurer is likely to charge a higher premium and may also offer a shorter policy term compared to Arjun's policy. This is because Ravi is more likely to pass away earlier than Arjun, and the insurer wants to mitigate its risk.On the other hand, Arjun's insurer may offer a longer policy term and a lower premium since Arjun is less likely to pass away early.

Thus, the mortality risk of an individual plays a significant role in determining the premiums and policy terms of their life insurance policy. A Mortality Risk Calculator allows individuals to assess their mortality risk. It also helps in choosing an insurance policy that provides adequate coverage and ensures financial security for their loved ones in the event of their untimely death.

Frequently Asked Questions

Here are the answers to the following questions regarding the mortality risk calculator in life insurance.

How can I access a mortality risk calculator in life insurance in India?

Most life insurance companies in India provide online access to their mortality risk calculator on their website. Alternatively, you can contact a representative from the insurance company to assist you in using the calculator and determining the appropriate premium amount for your life insurance policy.

Can a mortality risk calculator be used to determine the exact time of death?

No, a mortality risk calculator is a tool used to estimate an individual's risk of death based on various factors, but it cannot determine the exact time of death.

Is a mortality risk calculator accurate?

A mortality risk calculator is a tool used by insurance companies to estimate an individual's risk of death based on various factors. However, it is important to note that mortality risk calculators are not perfect and may not account for all factors that may affect an individual's life expectancy.

What are some benefits of using a mortality risk calculator in life insurance in India?

Some benefits of using a mortality risk calculator in life insurance in India include getting an estimate of the premium amount, saving money by not overpaying for the policy, and ensuring that the policy coverage is adequate based on the individual's risk of death. Additionally, using a mortality risk calculator can help individuals make informed decisions when selecting a life insurance policy.

What are the risk factors for mortality?

There are a few risk factors that a mortality risk calculator considers such as age, smoking, gender, hypertension, physical inactivity, etc.

How is the mortality rate calculated?

A mortality rate is calculated by dividing the number of deaths caused due to diseases by the total population.

What are mortality charges?

A mortality charge is the cost borne by the insurer in providing you with a life cover. Age is one of the crucial factors that affect mortality risks. Hence, mortality charges tend to increase with age. So you can lower mortality charges if you invest sooner.

Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on industry experience and several secondary sources on the internet, and is subject to changes.