10 Things You Must Know Before Paying Your Life Insurance Premium

Almost all of us are aware that premium is the price that has to be paid to buy the policy. However there are several aspects of the premium which are not well-understood. It is the premium which makes the insurance contract complete. It varies across insurance companies and plans. It can vary according to the sum assured and the proposer's age. The mode of paying the premium depends on the policy and the payment option which are offered by the policy. 

Below are a few things which you should keep in your mind before paying the premium.

10 Things You Must Know Before Paying Your Life Insurance Premium

Here's a list of 10 things that you should always keep in your mind before paying your premium:

1. Paying Life Insurance Premium

For most Insurance companies the premium can be paid online which makes the transaction very easy. At times the insurance companies offer savings on the premium rates based on the sum assured. Usually companies offer rebates on policies with higher sums assured. This in turn translates into higher profits for each unit for the premium paid. 

2. Rebates On Periodicity Of The Premium

You may choose to pay the premium yearly, monthly, half yearly or quarterly depending upon your cash flow. It is obvious that the cost of service premium is higher, the higher the frequency. Some insurance companies provide rebates on annual premium payments which are worked in the premium rates. 

3. Rebates Are Offered On Online Payment

Servicing costs for Premium which are paid online are lower than those which are paid physically. When premium is paid online, the company saves on the commission which needs to be paid to the agent as in case of policies which are sold physically. 

4. Extra Premium Is Charged In Some Cases

At times extra Premium is charged when the policyholder is involved in hazardous occupation. When the insured opts for additional riders with the base policy extra Premium is charged. 

5. Impact of Loading

The term loading comes into play when an insurance company deals with high risk candidates. Insurance companies take resort to loading when the risk of the individual is higher than normal circumstances. It can be due to medical history or a hazardous pastime as well.

6. Medical And Residential Loading

Loading can be medical, occupation and residential. In a group if all are healthy and one is obese, the premium charge will be higher. When someone is obese there are high chances of damages being caused to organs like heart, kidney and brain. Additionally some people live in countries where there is political unrest. They have to witness residential loading.

7. Advantages Of Level Premium

In the context of premiums, the level premium also needs mention. In this case, the premium charged in the duration of a contract remains the same. The premium which is guaranteed by the company cannot be changed at a later date. This proves advantageous to both life insurance company and the life assured. 

8. Tax Benefits On Paying Premium

The premium which you pay under a life insurance policy are eligible for tax deduction under Section 80C of the Income Tax Act, 1961. The insurance premium which you pay for yourself, for your children or for your spouse qualify for deduction under the same Section. 

9. Channels Through Which You Can Pay Your Premium

To ensure that the policy does not lapse, you need to pay the premium regularly. One of the most traditional ways is to make payments of the premium through a cheque. You can also pay the premium. By using your credit card. 

10. If You Forget Your Premium

In case you forget to pay the premium, there is a farce period of one month. During the grace period the policy will remain valid. After one month the policy will lapse. In case of eventualities the insurance company will not entertain claims. 

Concluding

Premium payment is very important for the policy to get going. If you stop paying the premium the policy will also lapse and you will not get benefits from the policy. This article will help you in knowing about all the tips that you should always keep in mind while paying the premium of your life insurance. 

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Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.