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9 Most Important Things You Must Learn About Paying Life Insurance Premium

  • 29th Sep 2019
  • 556
9 Most Important Things You Must Learn About Paying Life Insurance Premium

It is important to invest in a life insurance plan to secure the financial future of your loved ones. However, before you buy the policy, it is important to learn about the life insurance policy payment to avoid any mistakes.

What is life insurance premium?

When you purchase a life insurance plan, you are entering into an agreement with the insurance company that they will pay your nominees a particular amount of money when a claim is made. For this purpose, you need to pay them regularly until a claim is made. This payment is known as ‘the premium’.

Here are nine aspects of life insurance premiums you must know about:

1. You have to pay the premium in advance

The life insurance premium payment has to be made in advance. The insurer provides cash, check, Demand Draft (DD), and online payment options. The Insurance Regulatory and Development Authority (IRDA) has set the cash payment limit to INR 50,000.

2. You can receive a discount

Insurance providers often offer discounts on the premium. It depends on the mode of payment and the amount of the sum assured. You can get more information regarding this by contacting your insurer.

3. You can receive a rebate for a higher sum assured

If you opt for a policy with a higher sum assured, the insurer can make more profits, as they can save on service costs. This is why a higher sum assured guarantees a rebate on the premium.

4. There is a rebate for the periodicity of the premium as well

You can also get a rebate if you decide to pay your premium in longer periods. Frequent payments result in a higher cost of service charge, which results in less profit for the insurer.

5. You have to pay a higher premium depending on risk assessment

When you are buying life insurance plans, the insurers categorize you depending on the risks associated with your policy. So, if you have a serious illness or your profession exposes you to a higher risk, your premium will be extra.

6. The premium value can fluctuate

The premium amount might fluctuate depending on risks specific to you and your age. The policy documents come with clear instructions regarding this.

7. You can buy a single-premium policy

If you have some extra cash to invest then the single premium life insurance policy might be a good option for you. You have to make the payment just once.

8. What happens when you miss a payment?

If you, for some reason miss the due date, your policy lapses and the insurer does not provide any benefits. If your insurer agrees, you can revive the policy by paying an added interest.

9. You can get tax benefits in some cases

According to Section 80C of the Income Tax Act, 1961, any premium paid on behalf of yourself, your spouse, and your children come with tax benefits.

Remember these points to make sure that you do not make any mistakes that might result in the termination of your policy.

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