Things You Must Know Before Paying Life Insurance Premium

Having an umbrella of financial protection for the family during testing times can be comforting. A life insurance policy ensures that your family doesn't have to suffer from financial burden if something happens to you.  Hence, it is essential to choose the right plan which meets your needs at affordable prices. Read on to find out more about life insurance premiums.

What is a Life Insurance Premium?

Life insurance premium refers to the amount paid on the sum assured, fixed during the policy inception, by the life assured to honour his/her contract with the insurance provider. The premium rate is estimated after calculating the sum assured, age of the life assured, the plan purchased and the premium payment mode and conditions. The payment can be made in one of the following modes.

• Lump-Sum - Under this, the entire premium payment is made before the insurance coverage begins.
• Monthly - Under this, premium payments are made regularly each month. Although this model is easy and affordable, the policy cost increases as well.
• Quarterly - Under this, the premium is paid quarterly, i.e. 4 times a year. 
• Semi-Annually - Under this, the premium is paid twice a year. This is cheaper than the monthly payment mode.
• Annually - Under this, the total premium is paid at the end of the year. The cost of the premium is cheaper than all the other methods. 

Things You Must Know Before Paying Life Insurance Premium

Here is a list of some things that you must consider before paying the premium of your insurance policy. 

1. Advance Premium Payment

The life insurance policy premium has to be paid in advance through any payment mode provided by the insurance provider. This ensures continuity of the contract between the life assured and the insurer. The consequent death benefits are paid to the nominee or the beneficiary in the face of an unfortunate event. 

2. Discounts

The insurance providers give some discounts to the life assured on their life insurance premiums according to factors like the sum assured and selected premium payment mode as both influence the premium amount. Hence, it is essential to read all the terms and conditions of the policy you plan on buying to get the maximum discount.

3. Rebates

A rebate is an attractive discount offered to the life assured who pay their premium through the annual payment mode via online platforms, which lowers the servicing cost like processing cost and the insurer's administrative cost. So, when the life assured chooses these methods, the amount saved on the servicing cost is offered back as rebates. 

4. Tax Benefits

Under Section 80C of the Income Tax Act, the policyholder enjoys tax benefits on the payable premiums of the life insurance policy purchased for themselves or in the name of their spouse or children. Through this provision, you can save up to Rs. 1.5 Lakh each year. 

4. Grace Period

The additional time provided to the life assured to pay the premium on their life insurance policy without a fine or a penalty is known as the grace period. If the life assured falters on payment within this period, the policy might be terminated and all the benefits will be discarded. The grace period stays within the range of 15-30 days according to the payment mode selected by the life assured on their policy. 

Takeaway 

It is advisable to consider the arguments mentioned above to help find the best life insurance premium rate which fits within your budget. Moreover, it would be best to compare different life insurance policies offered by various insurers to make a more informed decision. 

You may also like to read -

• How to Choose a Life Insurance Policy to Meet Your Needs?
• Read All About Life Insurance Tax Benefits

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.