Insurance premium or life insurance premium is the amount of money, which is paid for a certain level of insurance cover for a particular time period.Example: monthly premium of $25.
: Yearly premium of $300.
In simple language we can say, Premium is the amount paid to the insurance company for the purchase of an Life Insurance cover or Life Insurance policy.
Amount of the Premium is depending upon the price of Insurance Cover. Policy Holder can pay it in some different mode of time, normally Life Insurance Companies offer monthly, Quarterly, Half yearly and yearly. In rare case it may be a one time payment. An insurance Premium must be paid regularly at the given period of time. There is any default in insurance premium can put the insurance Policy in Danger. If those kinds of event take place, this policy will be count up as lapsed policy. In this situation Insurance Company may not give all the benefits to the Policy Holder, If Policy Holder prevent his Policy than he have to pay Penalty. The Particulars of Penalty are given in the Policy Conditions.
Calculation of insurance premium
Calculation of an Insurance Premium is related with statistic and actuarial principals. This whole process is a complex technical progression. Mostly, well-trained and experienced professionals can calculate the insurance premium. Each insurance plan and each insurance policy has different premium. Each Insurance Company has their own tables for Premium calculation.
The premium cost is not based on necessarily on history or any individual habits, it’s generally based on statistics.
For an Example
Ex.1
A Young man, about 23 years old has a sport car. He is looking for Car Insurance. He can often anticipate a higher insurance premium than the premium of sedan car’s insurance, owned by a 50 year old man. They both are very good driver. In this matter an Insurance Company thinks that a young man in a fast sport car to be more risk for accidents. So that the different between that both Insurance Premiums are noticeable. And normally more expensive car has more cost to be insured. In this example an Insurance Premium is decided upon Risk and the cost of an insured thing.
Ex.2
This same method is used to calculate for medical insurance premium. Generally a smoker is not so healthy than a non-smoker. So a non-smoker can live healthier live. Therefore the Health Insurance Premium of smoker person is higher than the non-smoking person. A man working at a construction site and a man working as computer operator in an office, they both want to buy a Life Insurance. But they both have to pay different amount as Life Insurance Premium because the man, who is working on a construction has more probably to meet with an accident than the Computer operator. If the Policy holder can change the type of his or her working and change habits, the insurance company may be reduce or upgrade in their Insurance Premium.
More about Insurance
Insurance Policy
Life Insurance Vs. Other Saving
Types of Life Insurance
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