Buy a term plan and secure your family
Let’s discuss the basics in order to help you understand what exactly is an insurance premium and how does it work?
To define it in the easiest term, an insurance premium is an amount charged by your insurance provider against the policy you have purchased. Hence, making this premium the cost of your insurance.
You have purchased the best term insurance plan that includes a high coverage amount. However, it doesn’t end here, you will have to pay an insurance premium to continue the insurance services.
Generally, insurance premiums have a base calculation, and then on the basis of your location, personal information, and other factors as determined by the company, the discounts will be added to the basic amount of premium for getting the preferred rates, or lower insurance premiums.
Sometimes, the payment for insurance is done on an annual, semi-annual, or monthly basis. As mentioned above, the insurance premium is the cost of the policy, hence, anything above this cost will not be considered as premium.
For instance, when an insurance provider charges a fee for issuance, this extra fee is not premium. Normally, it would be defined separately.
The premium on any insurance is driven by the following key factors.
If you purchase an insurance policy, you will always have to pay higher premiums for higher sum assured. There are two ways to save on premium-
Insurance providers offer various options while purchasing an insurance policy. Your insurance premium may be higher if you select a comprehensive coverage.
For example, when looking for the best term plans, you will see that the one, which includes more additional benefits and high sum assured, will charge higher premiums.
If the insurance provider decides they really want to pursue a certain segment of the market, they may deviate the rates for attracting new business. This can be an interesting part of insurance premiums as it may alter drastically.
Your residence, history of insurance, and various other factors of your life are used as a part of the premium calculation. Each insurance company has its own rating criteria.
Some providers use the insurance scores of the applicants that can be calculated by taking various personal factors into consideration. These factors most of the time translate into discounts on the premium of your insurance policy.
In a Nutshell!
Insurance is not just about investing money for earning returns on it, it also about offering financial protection. But this protection does not come free. You will have to pay insurance premiums in order to remain secure under the insurance policy.
Before buying a policy, you must get an idea of the estimated insurance premium that you will have to pay. Your premium can be more or less expensive. The cost may vary depending upon the kind of coverage you are opting for and the risk factor involved.