An insurance premium is an amount of money that an individual or a business pays to the insurance provider periodically. Whether you are investing in a home, life, or health, insurance premiums work more or less the same.
Many people look forward to knowing what is premium in life insurance, health insurance and other types of insurance before buying any plan. In general, they need to pay the total insurance premium in instalments. In some cases, they can pay the entire amount upfront before the start of the policy. Policyholders must pay the premiums on time to avoid cancellation of their plan.
Insurance providers stipulate the insurance premium amount beforehand, depending on the coverage and other factors related to the insured. These often include assessing the likelihood of making claims, employment details, their medical condition, among others.
As the policyholder, you must consider several other things before paying the insurance premium for a specific plan. Let’s have a look at them to have a better understanding of what is premium in insurance.
: In Unit Linked Policies, the investment Risk in the investment portfolio is borne by the policyholder.
Written by
Reviewed by
One of the most crucial financial decisions in one’s life is to invest in insurance policies. Life insurance, to be precise, acts as a safeguard for your family’s well-being after you. As a policyholder, it is crucial for you to understand insurance premium meaning and recognize your specific requirements to determine the sum assured accurately.
Life insurance premiums are in place to keep the policy in force. These insurance premiums are carefully determined based on several factors related to the insured’s life. Therefore, you must understand the key factors that may affect insurance premium amount, making it higher or lower, including the possible discount on insurance premium payment.
People who regularly engage in life-risking activities such as mountain climbing, racing, and other such activities may cause the insurer to stipulate a higher insurance premium.
You can also calculate your term insurance premium even before buying your term insurance just by clicking on the button below:
Tax exemptionup to Rs. 54,600~#
High life cover at affordable premiums
Claim Paid Ratio^99.51%
Coverage against 64 critical illnesses@
Apart from the insurance premium, other factors make a policy desirable. As the policyholder, you must be well-informed before purchasing an insurance policy. It affects the life of you and your loved ones substantially in times of need. Here are some key things to consider while buying an insurance policy.
The requirements of your policy are also affected by where you are in life while purchasing them. For example, your first job, marriage, your children's birth will create different financial requirements.
The primary role of insurance is to offer financial assistance to your loved ones in times of crisis. Therefore, the sum assured may vary depending on the number of financial dependents and insurance premiums you can easily afford.
In each individual’s life, financial planning is vital to remain stress-free and peaceful. It is crucial to understand and plan your family’s future monetary needs at the time of purchase. Calculate a suitable life insurance premium amount to avoid any disappointment in the future.
While purchasing an insurance policy, it is crucial to opt for adequate coverage for your future needs. Certain factors determine the amount of coverage you may require. As mentioned earlier, be sure to understand your current and future financial needs to arrive at a suitable coverage amount.
Consider your liabilities, such as debts, including home, education, or vehicle loans, to zero in on an insurance premium that can fit well into your financial planning.
Since the insurance cover serves future expenses, you must consider the inflation rate before deciding on the coverage. Additionally, choosing a plan with adequate coverage at the right age will help you comfortably cover the insurance premium costs as well.
Deductibles in an insurance policy are the money the policyholder pays before the insurance policy covers the expenses. Simply put, it is the money you pay out of your pocket to share the cost of claims.
These deductibles are common to health and motor insurance policies. Many people opt for a higher deductible to lower their insurance premium cost or vice versa, depending on their financial requirements.
Deductibles in insurance policies serve the insurer as well as the policyholder. Since the insured shares the cost of a claim to an extent, it reduces the chances of frequent claims to the policy due to reckless behavior. It also allows a degree of financial stability to the insurer so that they are capable of assisting during actual catastrophic losses.
One of the many perks of insurance policies are the associated tax benefits. The government of India allows certain tax deductions on the insurance premiums paid by the policyholders. It is a significant incentive for people to invest in insurance policies.
Section 80D allows tax benefits for health insurance premiums. There are different limitations on the maximum deductible amount depending on the type of health plan.
For example, if the health insurance covers you and your family members, the total deductible is set at Rs. 25,000. In case you have a plan for parents under the age of 60, you are eligible for an additional Rs—25,000 tax benefit. Similarly, the limitations on the maximum deductible for insurance premium differ as per the terms of the health plan.
Section 80C allows tax benefits towards the life insurance premiums paid for various policies such as whole life plans, endowment plans, ULIPs, term insurance plans, money-back policies, and such.
There are other income tax-saving tips that you can use to avail of optimum benefits from your plan.
No, the insurance premiums are determined at the time of purchase and do not change over the plan's entire tenure.
If you fail to pay premium on due date, a grace period is given to make the payment. During the grace period, the insured can still avail of the benefits of the insurance policy. This period may also depend on the frequency of insurance premium payments. It will be lower for monthly and higher for yearly or half-yearly.
The insurance cover works the same during the grace period. There are no penalty charges, and the insurance premium amount remains unchanged. In case of an unfortunate incident during the grace period, the claim settlement process stays the same.
Under the waiver of premium rider, insurers may waive any future insurance premium payments if the insured is critically ill, injured, or disabled. It comes as an optional rider on the life insurance plans.
If you exceed your insurance policy's grace period, in all likelihood, the policy will lapse. However, many insurers offer an option to restore or reinstate the policy. Keep in mind that the process of restoring the insurance policy will likely be expensive, and you will have to pay penalties.
ARN NO: Nov23/Bg/08K
4.5
Was the Information Helpful?
Very Good
Know more about 'what is insurance?' and how it works, including its mechanism and guiding principle of insurance...
Read More
It is a commonly held belief that term insurance should be the first step in financial planning...
Read More
Life insurance can be defined as a type of insurance scheme that makes a payment to a specific beneficiary or group of beneficiaries...
Read More
99.51% Claim paid ratio^
Financial protection throughout life
