Know what is insurance premium, meaning & how it works
When you buy any kind of insurance, you pay a premium. What is the meaning of insurance premium? It is the payment made by the policyholder (one who buys a policy) to an insurance company for particular coverage. At the time of buying the insurance a premium payment (intervals chosen by both the parties) mode is decided. According to this mode, the policyholder must make regular payments in intervals until the maturity of the policy, or as specified in the policy documents, in order to avail of the said life insurance cover, along with the other monetary benefits. Also, the premium must be made regularly until the policy’s maturity, or as stated in policy documents, to avail of a specific life insurance cover and other monetary benefits.
The premiums are paid quarterly, monthly, every six months or annually depending on the policy. The price of the premium is based (or decided) on so many factors. A few of them are:
The type of coverage you are seeking
The area where you reside
Claims (if any) filed in the past
If you are buying a life insurance policy, then the age at which you start coverage will determine your premium amount, along with other risk factors (such as your current health). The younger you are, the lower your premiums will generally be. Conversely, the older you get, the more you pay in premiums to your life insurance company.
Who decides the insurance premium?Future risks and perils
The costs associated with the event of a disaster or claim
Every insurance company has professionals who work in various areas of risk assessment. Actuaries (who look at risk for a living. This is done using mathematics, statistics, and financial theories), for instance, work for an insurance company to determine:
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