What should you know about paying term insurance premium?
What is a life insurance premium? In simple words, the premium is the amount that you pay towards your insurance policy. But there are certain aspects of premium that usually people don’t understand. Such as what should be the frequency to pay the premiums? What are the different types of premiums? What to do if you forget to pay it? Are premiums eligible for tax benefit amongst others? Overall, you should have a basic knowledge of all such aspects to select and maintain your life insurance policy.
Discount on premiums
Premiums differ across various insurance policies. The amount of premium is usually based on the sum assured, tenure of the policy, your income and age of the applicant. There are different modes for paying term insurance premium and frequency of paying life insurance premiums depending on the payment option offered in the policy and the type of insurance policy chosen. Many times, insurance companies offer discounts on the rate of premium based on the insurance coverage amount and the mode of premium payment. These discounts in insurance language are known as rebates.
Discount on life insurance premium payment frequency
Policy premiums can be paid periodically that is – annually, half-yearly, quarterly, or monthly. The policyholder can choose any of these depending on his or her convenience. However, higher the frequency of the premium payment higher will be the premium rate due to the high cost of servicing that includes collection, processing and cost of administration. Hence, if the premium gets paid at one go for the entire year that is annually, then it comes less expensive than premiums paid monthly. In case of policies wherein premiums are paid one time, or there is a limited premium payment policy, this discount is already included in the rate of premium.
Discount on online paying term insurance premium
If the premium is paid online, then its servicing cost for the insurance company is much less than if paid physically. The companies also save on paying commission to the agents if the policy is bought online. Hence, depending on the insurer, discounts might have already included in the premiums before the online premium payment rates are quoted.
The regular premiums are meant for those who only opt for standard insurance policies. In case people go for riders because of the risk of their health problems, or if they are involved in a hazardous occupation, then the insurer charges an extra the premium for the chosen add-on benefit over and above the normal premium rate.
Non-payment or late paying term insurance premium
In case the policyholder does not pay the life insurance premium on the due date, then the policy is considered lapsed, and the insured loses all its benefits. However, most of the policies provide a grace period to the policyholder after the due date to make the premium payment. During this period the policyholder can pay the premium without any additional charge. If the policy gets lapse, then it can be revived by paying the overdue premiums with
interest along with a declaration about the insured person’s health or a fresh medical examination. But thus, can be done only if the policyholder agrees to do so.
Tax benefit on the premiums paid.
The premiums paid towards the life insurance premium comes under section 80C of the Income Tax Act, which means that the amount paid for the premiums are eligible for deduction from taxable income. However, the premiums paid for the insurance policies in the name of any third party such as parents or in-laws other than spouse or children, are not eligible for tax benefit under section 80C. If the policyholder is paying a premium for more than one insurance policy, then he or she can include all the premiums paid.
Therefore, if you are paying the term insurance premium, then do keep in mind all the pointers as mentioned above, such that you completely understand the concept of term insurance and select the right one. To get further clarity on your any prevalent confusion, you can visit BimaKaro.in or speak to their financial experts for better understanding.