While opting for Life Insurance is certainly a smart move, there are a few things you need to know about paying Life Insurance premiums.
Opting for a Life Insurance plan is certainly a good move. However, if you are still pondering about whether to get one or not, don’t worry! Once we tell you everything you need to know about paying the premium, you might just change your mind.
Life Insurance premium: What’s that?
Let’s start from scratch.
When you take up a Life Insurance policy, you’re basically signing a contract with the Life Insurance company to provide the beneficiaries of your policy a lump sum payment in case of your death. In return, you make fixed periodic payments to them called premiums.
Additional Reading: Term Life Or Whole Life Insurance?
Here’s what you need to know about paying Life Insurance premium:
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You have to pay it in advance
You’re supposed to pay the premium in advance, with the option to pay via cash, cheque or DD. The upper limit for a cash payment, as set by the IRDA, is Rs. 50,000. However, most insurance providers give you the option to pay your premium online.
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You can get a discount
You can avail a discount on your premium based on factors like the sum assured and the mode of payment. Talk to your insurance provider about it.
Additional Reading: The Definitive Guide To Buying Term Life Insurance
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You can get a rebate for the sum assured as well
Most insurance companies provide rebates for a higher sum assured. The higher the sum assured, the lower the servicing cost per unit. Since lower servicing costs mean higher profits for insurance providers, they tend to give rebates on a higher sum assured.
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There’s a rebate for the periodicity of the premium as well
Normally, you get to choose the periodicity of paying the premium according to your preferences. It could be quarterly, monthly, half-yearly or annually, depending on your financial situation. The only thing that you need to keep in mind is that as the frequency of premium payments increase, the cost of servicing rises as well.
Additional Reading: Mistakes To Avoid When Buying A Life Insurance Policy
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You might have to pay an extra premium. Don’t panic!
If you classify as a ‘normal’, low-risk subject, the standard premium rates will apply. But, if the insurance provider sees you as a high-risk subject, like someone with ailments such as a heart disease or diabetes, they might ask you to pay a higher premium. Insurance providers also see hazardous occupations as a big risk. These factors may increase premium rates for you.
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The amount of premium can fluctuate
Premium amounts could increase or decrease depending on factors like age and risks involved. As the mortality rate increases, you will be required to pay a higher premium. But, don’t worry! In case of mortgage redemption policies, the premium decreases as your outstanding loan amount decreases.
Additional Reading: Popular Online Term Insurance Plans – 2017
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You can avail the single-premium option
If you belong to the higher-income bracket, you can get the chance to make a single premium payment as well. There are exclusive single-premium policies for people with some extra cash handy.
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What happens if you miss a payment or pay late?
If you miss paying the premium on its due date, the policy lapses and you lose the benefits that you’d have otherwise received. Don’t worry! A lapsed policy can also be revived by paying the overdue premiums, with some added interest of course. But, this happens only if the insurer agrees to do so.
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You can avail tax benefits in special cases
If you, as a policyholder, pay the premium for yourself, your spouse, or children, you can avail tax benefits under Section 80C of The Income Tax Act. But, if you’re paying the premium for third parties like your parents or parents-in-law, those payments are not eligible for tax deductions.
Additional Reading: Why Taking Stock Of Your Family’s Life Insurance Need Is Important
Now that you know all there is to know about paying Life Insurance premiums, maybe it’s time to choose a plan that provides optimum protection for your loved ones. We’ve got everything you need right here and then some! Choose from a range of Term Insurance, Health Insurance, Car Insurance, Two-Wheeler Insurance and Cancer Care plans.