Two friends compare notes about insurance. Both have 10 million baht of life cover, but their premiums turn out to be worlds apart — one pays a few tens of thousands a year, the other several hundred thousand. Has someone been cheated? Nobody has: insurance premiums are determined by more factors than people realise. Let's unpack them one at a time.
Factor 1: the type of plan, the biggest variable of all
The same sum insured under different kinds of contract can differ several times over in premium. Term insurance pays only for cover over a defined period, so its premium is the lowest. Whole life covers for a long time and accumulates value, so the premium is considerably higher. An endowment has a large savings component built into the premium. A 10-million term policy for a young person may cost tens of thousands, while the same sum insured under an endowment could be several hundred thousand, because most of the money is saving rather than the cost of cover. The two friends above may simply hold different kinds of contract.
Factor 2: age at the application date
Premiums are calculated from statistical probability. The older you are, the higher the annual risk, so the premium climbs with the age at which you start. Someone applying at 25 and someone at 45, for the same plan and the same sum insured, pay clearly different premiums. That is the mathematical reason behind "starting early is an advantage" — not a sales line.
Factor 3: sex
Statistically, women's average life expectancy is longer, so life insurance premiums for women of the same age are usually lower than for men. On the health insurance side, some age bands may be the reverse, according to claims statistics. All of it comes from statistical tables, not discrimination.
Factor 4: health and behaviour at the assessment date
Underwriting sorts people into risk groups. Someone in standard health gets standard rates, while someone with an existing condition, significantly excess weight, or a smoking habit may have a loaded premium according to the assessed risk. Smoking alone makes a significant difference against a non-smoker in many plans. This is the part we control most, by looking after ourselves before applying.
Factor 5: occupation and risky hobbies
High-risk work — working at height, mining — or activities such as deep diving or rock climbing may be placed in an occupational class with a higher premium or specific conditions, according to each company's criteria. That is why the application always asks about it, and it must be answered truthfully, as with health.
Factor 6: the premium payment term and contract conditions
The same plan and the same sum insured, but a short payment term (10 years, say) versus a long one (to the end of the contract), gives different premiums per instalment: the short term costs more per year but finishes sooner. Riders attached also change the total premium while the life sum insured on the front of the policy stays the same. When comparing premiums with anyone, always compare every layer of the components.
The lesson to take away: comparing premiums like a professional
One: don't compare premiums across different kinds of plan — compare the same kind, on similar conditions. Two: always ask what riders the quoted premium includes. Three: know which factors you control (health, behaviour, the age at which you apply) and use them to your advantage. Four: the cheapest premium is not the most suitable — look primarily at the cover received per baht. If you are wondering whether your own premium is reasonable, message us on LINE and we will unpack the components with you.
This article was inspired by material from the Thai Financial Planners Association (TFPA) and has been entirely rewritten.