Life Insurance Premium: A premium is an amount paid by the insured person to the insurance company, and the insurance company pays it back as a claim amount.
It is very important to pay the insurance premium on time to keep the policy active or avoid any late fees on premiums.
Basic knowledge is necessary in order to buy the best life insurance and keep the policy active. You need to know what an insurance premium is and what the late fees are if you fail to pay premiums on time. Let’s know a few necessary things about the life insurance plan.
Life Insurance Policy Definition
Life insurance can be defined as a contract between the insurance provider and the insured person where the insured person pays a premium regularly and the insurance provider is liable to pay a fixed sum-assured amount as a claim amount.
Life insurance premiums vary from company to company and also depend on various factors like policy term, nature of policy, the sum assured, the age of the policyholder, and the purpose of the policy, etc. The insurance policy premium is most important when buying an insurance policy.
The insurance premium is decided based on the policy taken by the insured person, and the payment mode depends on the nature of the policy and the insurance company. Premium mode could be monthly, quarterly, half-yearly, or yearly.
Insurance companies also offer to pay a premium in advance that could be up to ₹0.50 Lakh via cash. Advance payment is offered by insurance companies through an online medium, which is very easy and hassle-free. People can pay insurance premiums online using credit, debit, net banking, E-wallet, etc.
Life Insurance Premium Discount offered by Insurance Companies
Most insurance companies offer a discount on paying insurance premiums if an insured person pays their premium on time. The insurance premium discount offered depends on the mode of payment. Premium discount also depends on the sum assured of the policy.
Management cost on the premium paid through the offline mode is higher than the premium paid online. So, if you pay premiums through online mode, you may get more discounts on the life insurance premiums.
If the insurance premium is paid through online mode, the insurance companies need not pay any commission to the agent, which leads to giving more discounts on the premium. By selling insurance policies online,e insurer can improve its productivity compared to policies sold as paper policies. All these benefits are passed to the customer as a discount on insurance premiums.
It is true that the higher sum assured will get more benefits on the premium rebate. The reason behind this because the maintenance cost for a similar kind of insurance policy is almost the same. So, the higher sum is assured, which means lower serving costs. The benefits of insurance tax rebates depend on the per-unit premium.
The insurance premium payment period is likely monthly, quarterly, half-yearly, and yearly, which an insurance policyholder can choose according to their ease. However, more frequent premium payments will cost more to the insurance company due to processing & administration costs.
It is also right that when an insurance policyholder pays a premium every year, the processing and administration costs are lower, and the premium amount is available for investing as a whole. Due to this, insurance companies get more returns by investing them wisely, and it results in rebates on premiums for the policyholder.
More about Life Insurance Premium
The insurance company can charge an extra amount as a premium for some people who carry more risk because they suffer from health problems like heart disease and diabetes, and work in a risky environment.
People who don’t carry more risk, as they don’t suffer from these deadly life diseases, are normally charged with standard insurance premiums. Sometimes, add-ons are required to cover some specific life coverage, which can cost an extra premium.
According to the level premium, the premium amount cannot be changed at a later stage by the insurance company. Most term and life insurance policies come with a level premium where an insured person has to pay a fixed amount as a life insurance premium on a monthly, quarterly, half-yearly, and yearly basis.
The insurance company also provides the facility to pay the insurance premium in one go for people who have higher income, known as a single premium policy.
There really is a lot that you need to know before you decide whether or not to get a life insurance premium. For example, you may need to know the payment rates or when you need to have the payments ready. That way you can get an idea of how often you will be charged for your life insurance premium.