Last Updated by Richbrite on May 21st, 2021 at 07:01 am
Life Insurance Premium: Premium is an amount paid by the insured person to the insurance company and the insurance company pays it back as claim amount. It is very important to pay the insurance premium on time to keep the policy active or avoid any late fee on premiums.
Basic knowledge is necessary in order to buy the best life insurance and keep the policy active. You need to know what 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 an insured person pays a premium on a regular basis and the insurance provider liable to pay a fixed sum-assured amount as claim amount.
Life insurance premium varied from company to company and also depends on various factors like policy term, nature of policy, the sum assured, the age of policyholder and purpose of the policy, etc. insurance policy premium is most important while buying an insurance policy.
Insurance premium decided based on the policy taken by insured person and payment mode depends on the nature of policy and insurance company. Premium mode could be like monthly, quarterly, half-yearly, and yearly.
Insurance companies also offer to pay a premium in advance that could be up to ₹0.50 Lakh via cash. Advance payment offered by insurance companies through an online medium which is very easy and hassle-free. People can pay insurance premium online using credit, debit, net-banking, and E-wallet, etc.
Life Insurance Premium Discount offered by Insurance Companies
Most of the insurance companies offer a discount on paying insurance premiums if an insured person pays a 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 off-line mode is higher than the premium paid through online. So, if you pay premium through online mode you may get more discount on the life insurance premiums.
If the insurance premium paid through online mode the insurance companies need not pay any commission to the agent which leads to giving more discount on the premium. By selling insurance policies online insurer can improve their productivity compare to policies sold as paper policy. All these benefits 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 maintenance cost for a similar kind of insurance policy is almost the same. So, the higher sum assured which means lower serving cost. Benefits of insurance tax rebate depend on per unit of premium.
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 as processing & administration costs.
It is also right when insurance policyholder pays a premium on a yearly basis the processing and administration cost are less and the premium amount available for investing as a whole. Due to this insurance companies get more returns by investing them wisely and it results in rebate to premium for the policyholder.
You may like to Read: How to Reduce the Cost of Life Insurance Purchase
More about Life Insurance Premium
The insurance company can charge extra amount as a premium for some people who carry more risk because they suffer from health problems like heart disease, diabetes, and works in a risky environment.
People who don’t carry more risk as they don’t suffer from these life deadly diseases normally charged standard insurance premiums. Sometimes add-ons required to cover some specific life coverage which can cost extra premium.
According to the level premium, the premium amount cannot be changed at a later stage by the insurance company. Most of the term and life insurance policy comes with a level premium where an insured person has to pay a fixed amount as life insurance premium on the monthly, quarterly, half-yearly, and yearly basis.
The insurance company also provide the facility to pay insurance premium at one go for people who have higher income known as a single premium policy.