When you purchase a life insurance plan, you need to consider several factors to ascertain the death benefit to your family in the event of your unexpected death. The life insurance premium is one of the most important factors among them. The more the benefits you intend to receive from the life insurance plan, more the premium. Well, several aspects affect the life insurance premium! Therefore, let us try to understand the important aspects you need to know before paying the insurance premium.
Before we get started, let us understand what a life insurance premium means.
What Is A Life Insurance Premium?
A life insurance plan is a financial agreement wherein your insurer will provide a financial death benefit to your nominee in the event of your unexpected death. The premium is the cost that you incur for such a benefit.
You can pay the premium as a single payment at inception, regularly throughout the policy tenure, or regularly for a limited term. For the regular premium payment policies, you can pay the premium monthly, quarterly, semi-annually or annually based on the insurer's policy conditions. Here are a few important aspects to consider before paying the premium for such a life insurance policy.
Things to Consider Before You Pay The Life Insurance Premium
Increasing your knowledge about the life insurance premium payment in savings important to ensure maximum financial benefits. Here is a detail to help you understand them better.
- Premium is paid in advance - The premium for your savings policy is paid in advance. You can pay the premium in cash upto ₹50,000. Insurers also offer life insurance premium online payment for such cases and all the other scenarios.
- Rebates on life insurance premium - Insurance providers offer discounts on the premium for the life insurance plan. And it is referred to as the rebates. When the sum assured is more, the cost of processing and servicing such policies with the same type becomes cost-effective, resulting in more profits for the insurance providers. So, they offer rebates on the premium cost to benefit the policyholders.
Also, if the periodicity of the premium payment is more,, the processing cost for the insurer gets more. And in the case of annual payments, the processing cost is less, and the fund remains with the insurer for a longer period, providing more returns. Therefore, insurers tend to provide rebates to people who pay their premiums annually.
Furthermore, there are additional rebates for policyholders who choose to make the premium payment online, considering the ease of processing and the avoidance of intermediaries such as the agents in managing the premium payments.
- More premium for specific scenarios - The life insurance premium payment can be more for certain individuals in specific scenarios. For example, if you have a health complication, it increases the probability of death risk that the insurer has to bear, causing an increase in the premium rate.
- Level premium - The level premium is the concept of having the premium rate consistent over the entire policy tenure. It is generally offered on whole life insurance policies where the life cover is not defined for a certain policy tenure but until death.
- Increasing and decreasing premium - Some insurance providers offer to increase and decrease life insurance benefits based on the sum assured, which corresponds to the change in premium cost. For example, suppose you want to increase the sum assured at different stages in your life based on changing family commitments. In that case, you can increase the sum assured and pay more premium. On the other hand, suppose if you feel that your children can take over the important family debts, you can call for a decreased sum assured, reducing the premium going further.
- Life insurance premium 80C tax* benefits - The premium you pay for a life insurance plan will qualify for a tax* deduction benefit under Section 80C of the Income Tax Act, 1961, subject to certain terms and conditions. The tax* benefits of life insurance premium under 80C apply to the insurance savings plan purchased for self, spouse and children. Also, the life insurance premium deduction can be upto ₹1,50,000 for a financial year. However, it is important to note that the deduction applies to many other financial savings, including the investment made in the life insurance policy.
- Late payment or no payment of the premium - When you have purchased a savings plan for the long term and have not paid the premium on time, the benefits will not be applicable. However, insurers provide a grace period wherein you can pay the premium and ensure the benefits without extra charges. Beyond the grace period, the savings policy will lapse. Insurance providers also offer the option to revive the life insurance plan after it has lapsed by paying the overdue premiums. However, it is subject to the insurer's discretion.
- GST1 on life insurance premium - The GST1 applicable on life insurance premium is based on the type of life insurance and is subject to change based on the government policy
Our policy provides different premium payment options such as single, regular and limited premium payment options for the insurance savings plan. Furthermore, you can use online premium calculators to determine the most affordable premium payments. In addition, our customer service team can help you evaluate your family’s financial obligations to decide on the best and most appropriate product solution for all their financial needs.
The life insurance premium is one of the most important aspects of a life insurance plan. It is based on the sum assured and the policy term. Therefore, policyholders must understand certain aspects of premiums, such as the rebates, types, tax* benefits, etc., to make well-informed decisions. Therefore, ensure to save in the right life insurance plan, make sure it is affordable and stay invested in it for the benefits in the long term!