If you hold any insurance policy, then you must be making a significant amount towards it in exchange for your insurance coverage. Well, it is the amount that is often termed as the insurance premium. In other words, it is the cost of the insurance policy that you pay on a monthly, quarterly, or yearly basis. Some people also pay a lump sum amount for their coverage. This premium serves as a source of revenue for insurance companies, which further helps in covering the costs of claims and other expenses.
Whether you are paying an insurance premium or not, here are some major types of insurance premiums you must be aware of. These premiums not only provide you with financial protection but also help you manage your risks effectively. So, in this article, we would be exploring the significant insurance premiums and what specialty they hold.
As the name suggests, single premiums are all about paying the entire amount upfront in a lump sum instead of paying it on a regular basis. Once you have paid the amount, you get immediate access to insurance coverage. This helps you get rid of all the worries about making regular premium payments or the risk of missing your payments on time. It offers convenience and saves you time as you wouldn’t then need to keep track of your payments. Also, single premiums can save quite an amount in the long run. Yes! In the beginning, the single premium amount may be higher, but it is quite cost-saving when considered in the long run.
One of the most popular and common insurance premiums on the basis of the premium paid! This is where the premium amount you pay would remain constant throughout your policy term. For example, if you purchase a 15-year life insurance policy with a level insurance premium of about 5000 INR per year, then you would need to pay 5000 INR every year until the end of the policy. You can also opt to pay it on a monthly and quarterly basis. Level premiums are advantageous for long-term insurance needs as they offer predictable payments and eliminate the risk of sudden increases.
Though not common, policyholders can also take up adjustable insurance premiums, otherwise called flexible premiums. This is the structure where you have flexibility in terms of payment amounts or frequency. In short, you can change the premium amount or its payment period during your policy tenure. This customization ensures that you only pay for the level of coverage you require, thereby, avoiding overpaying for unnecessary coverage. It can also help individuals who have fluctuating incomes as it would provide them with the ability to reduce or increase insurance bill payment accordingly.
Another type of insurance premium where you can save your money in the long run. During limited insurance premiums, you are required to pay a fixed premium amount only for a specific period, often a shorter duration, instead of paying for the entire policy term. The benefits of limited premiums include affordability during the initial period, and hence, allowing policyholders to obtain coverage at a lower cost. However, it’s important to carefully consider the potential increase in premiums after the limited period and assess whether the policy remains affordable in the long term.