What Is Insurance Premium?
There are many types of insurance policies available in the market. You can choose any policy to remain safe from certain risks or events. Some well-known types are life plans, health insurance, term plan, auto insurance, etc. Businesses, individuals, families, or groups can opt for a policy when there is a need.
One thing that is common across all policies is the premium. This premium is vital to ensure safety from risk factors in the first place and to keep the cover active as long as you desire.
There can be some queries in your mind, like what is insurance premium meaning? Why must you pay it? Read on to learn more about some vital aspects of insurance premiums.
What is Insurance Premium?
An insurance premium is defined as the sum of money that must be paid to an insurer to start or renew a policy. These premiums are defined at the start of the policy by the insurer. Premiums do not change until there is a policy change by the insurer or an increase in the sum assured.
Payment of premium offers cover for one year, but in some cases, you can pay for a longer period as well. The cover under a policy starts only after the premium has been paid to the insurer.
To continue the cover, the insured person(s) must pay the premium before the due date every year. There is a grace period of 30 days for the insured person after the date to renew the policy has passed to pay the premium. The policy will be cancelled if it is not paid within this period.
There are many factors that insurers consider to assess the premium. This involves policy amount, risk factors, age of the person(s), and several others. Once the premium has been paid to the insurer(s), it is their liability to offer cover for claims made under the policy.
Factors Affecting Insurance Premium
Now that you know what is insurance premium, it is vital to know the factors that can affect the amount of the premium. Insurers consider many factors to assess the premium for policies, such as:-
Some of the factors that insurers consider to determine life insurance premiums are: –
- Age of the person
- Income of the person
- Amount of cover
- The health of the person
- Policy period
Insurers consider the factors listed here to assess health insurance premiums: –
- Age of the person(s) when the policy starts
- Cover amount
- Health status
- The lifestyle of the person
- Cover for common or uncommon ailments
Key factors that affect the premium for auto insurance are as follows: –
- Chances of a claim being made
- Driving record of the person
- Value of the car
- Other risk factors
- City where the car will be driven
Insurance Premium Calculator: A Useful Tool
Till now, you have learned about insurance premium meaning and the factors that affect them. It is time to know what is an insurance premium calculator. This amount is crucial as it impacts the final decision, i.e., to opt or not opt for a policy. Earlier, to get this amount, the skills of experts were used. The steps were not easy, and it took time for even experts to calculate them. This led to a delay in sharing information with parties.
With the help of an online insurance premium calculator, you can easily get the premium for a policy. This helps make a final call as you can compare many insurers and their offers. The details you need for using this tool are date of birth, profession, net income, education, etc.
Here are the steps you need to follow to use this vital tool: –
Through a Website
- Log on to the portal of the insurer
- Click on the link for the insurance premium calculator
- Here you will need to select the type of policy you need
- On the next page, you must enter all the vital details
- Enter only the correct info for the policy term and amount as well
- Click on the submit button
- The premium will be visible on the screen
- You can follow the same process for all insurers if needed
Through a Mobile App
- Open the app on your phone
- Tap on the calculator button in the app
- Opt for the type of policy you want
- Enter all the details and click on the submit button
- The premium will be visible on your screen
Insurance Premium: Many Benefits on Offer
Payment of policy premiums secures a person from many risks, offers suitable cover, and provides many benefits for the person(s). Some of the key benefits of paying the premium on time are:-
- Income Tax– You can get many tax benefits on payment of premiums under the Income Tax Act 1961, such as: –
- Sec 80C: Premiums paid for life plans, term plans, and many others are eligible for the rebate
- Sec 80D: Here, you can get IT benefits for a premium paid for a health policy taken for yourself, your spouse, children, and parents
- Cashless option– There is no need to pay any cash at many health centres and hospitals if you have a mediclaim policy that offers this feature
- Financial backup– When there is an urgency, you do not need to use your savings. The insurer will cover your risk till the cover amount is used up
- Access to better facilities– In the case of a health plan, you can get better perks with your policy. Many hospitals now require patients to have health coverage to get treatment for many ailments.
When you pay a premium for a policy, you invest in your future. Do not consider it an expense. You get to enjoy safety from many types of risks during tough times. You must not select a policy if the insurer offers a low premium. You must focus on the type of cover and perks you will get from the policy. Take some time, research, and compare many times before you make a final call. After you get a policy, renew it every year to enjoy the perks for longer periods. Visit the website of Piramal Finance to get detailed information on insurance premiums.
Also Read: Grow Your Money By Investing In IPOs
More articles for you
Things to Consider While Renewing Your Health Insurance Policy
Different Types Of Travel Insurance Plans In India
Things you should keep in mind while buying a Home Insurance
What Does Health Insurance Not Cover?
Know How Motor Insurance Premiums are Calculated in India
Everything you need to know about the importance of travel insurance