What is Insurance Premium and how does it work?

In simple words, an insurance premium is defined as the amount the insurance company is going to charge for the insurance policy you are purchasing. Insurance premium is the cost of your insurance.

Here to help you understand the basics of an insurance premium and how it works.

What is Insurance premium? 

An insurance premium is the amount an individual or business pays for an insurance policy. Insurance premiums that cover health care is paid for auto, home, and life insurance policies. When you pay your insurance premium, this is an earning of insurance company.

It also represents an obligation, as the insurer must provide coverage for claims being made against the policy. Failure to pay a premium on behalf of the individual or business may result in the policy being canceled.

Key points

  1. An insurance premium is the amount an individual or business has to pay for an insurance policy.
  2. Insurance premiums are paid for policies that cover healthcare insurance, auto insurance, home and life insurance.
  3. Failure to pay a insurance premium may result in the cancellation of the policy and loss of coverage.

How Insurance premium work?

The insurance premium usually has a base calculation, and then based on your personal information, location and other information, you will get a discount that is added to the base premium which reduces your cost.

To obtain specific rates, or more competitive or cheaper insurance premiums, additional information can be used. We explain these factors in more detail below in our article about the four factors that determine the premium given below.

Insurance premiums are sometimes paid on an annual basis, half-yearly or monthly. If the insurance company decides that they want the insurance premium in advance, they may also need it. This often happens when a person has canceled their insurance policy for non-payment in the past.

Premium is the basis of your “insurance payment”. In some cases insurance premiums may be considered taxable income for you (for example, coverage for group-term life insurance that exceeds $ 50,000 and is made directly or indirectly by the employer). 1

In addition, service fees may be added to this depending on local insurance laws and the provider of your contract. If you have questions about fees or charges on your premium, the National Association of Insurance Commissioners guidelines or your state insurance commissioner’s office can provide you with more information about your local regulations.

Any additional fees, such as issuance fees or other service charges, are not considered premium and will be itemized separately on your premium or account statement.

Types of Insurance Premium

I described some types of insurance premium below, check them for a good knowledge :-

Life insurance premium

For life insurance, the insurance company, first of all, checks your health and medical history, your family’s medical history. Your drinking and smoking test is also checked by an insurance company. You can also expect to go for a medical examination and laboratory tests. The amount of coverage also depends on the amount of insurance premium you pay for your policy.

Health insurance premium

Many people get their health insurance through their jobs, so the size of the premium is determined by which coverage you choose. If you are purchasing your health coverage through a health insurance exchange, other factors may affect your premium – such as what types of insurance are available, how many companies are competing on the exchange, and how many people insured on the exchange Are also buying.

Motor insurance

Motor insurance refers to policies that provide financial assistance in the event of accidents involving your car or bike. Motor insurance can be issued for three categories of motorized vehicles, including:

Car Insurance – Personally owned four-wheelers are covered under such policy.

Two-wheeler insurance – Individual-owned two-wheelers including bikes and scooters are covered under these schemes.

Commercial Vehicle Insurance – If you have a vehicle that is used commercially, then you need to get insurance for it. These policies ensure that your business automobiles remain in the best shape, reducing losses significantly.

Travel Insurance

When talking about different types of insurance policies, one should not forget to know more about travel insurance plans. Such policies ensure the financial security of the traveler during the journey. Therefore, when we compare travel insurance to other insurance policies, It is short-term cover.

Depending on the provider you choose, travel insurance can sometimes provide financial assistance, such as during luggage loss, cancellation of travel, and more. Take a look at various types of travel insurance plans available in the country:

Domestic Travel Insurance – This is a type of travel insurance policy that protects your finances while traveling within India. However, if you plan to step out of the country for a holiday, such a policy will not provide any assistance.

International Travel Insurance – If you are going out of the country, make sure that you choose an international travel insurance plan. This allows you to cover unexpected expenses that may arise during your trip such as medical emergencies, loss of baggage, loss of passport, etc.

Home Holiday Insurance – When you are traveling with your family, your home remains unsafe and unsafe. The possibility of theft is always important, causing significant damage. Thankfully, with home holiday insurance plans, which are often included in travel policies, you are also financially protected from such incidents.

Property Insurance

Any building or fixed structure can be insured through property insurance schemes. This can be your place of residence or business. If there is any damage to such property, you can claim financial assistance from the insurance provider. Keep in mind that such a scheme also financially protects the contents inside the property.

Types of property insurance in India

Here are some types of property insurance policies available in India:

Home Insurance – With such a policy, you are free from all financial liabilities that may damage your home or the contents inside due to fire, theft, storm, earthquake, explosion and other events.

Shop Insurance – If you are the owner of a shop, which serves as a source of income for you, then it is mandatory to protect yourself from the financial liability arising from it. Whether with liability due to natural disasters or due to accidents, with these plans, you can repair the shop immediately.

Building Insurance – If you have a complete building, the option of home insurance may not be enough. Instead, you can purchase building insurance to cover the entire campus.

Insurance premium providers

The insurance sector has shown amazing growth in recent years. It is expected to develop in a big way in the future as well. In past years, there were only two insurance companies in India – Life Insurance Corporation of India and General Insurance Corporation of India. Now, there are 24 life insurance and 34 general insurance companies in the region which offer various innovative products keeping in mind the different needs of the people. Many of these companies have entered the market in collaboration and partnership with international firms.

These companies have come up with a bundle of policies which have their advantages and disadvantages. Every investor has their own needs, risk appetite, future goals and budget. According to these factors, a plan unhelpful for one may be best for the other.

We are providing you a list of general and life insurance companies based on their policy fees, overall expert rating, complaint rating, financial strength, credit rating and other such factors. You can also understand the products of these companies through product reviews, articles and other details provided by us.

Aditya Birla Health Insurance
Bajaj Allianz Health Insurance 
Care Health Insurance 
Star insurance
Hdfc lifecare
Axis bank 
Lic Insurance
Oriental Insurance
Reliance Insurance
Sbi Insurance

Best Insurance premium policies

There are many best insurance premium policies in the market. Today we will provide a list of best insurance premium policies in Life insurance premium.

Life Insurance premium policies 

Life Insurance Premium policy is a deal between an insurance company and a premium payer that is a policyholder. In this deal the company offers financial coverage and guarantee to pay a certain amount to the policy holder. In return of this or according to Deal policyholders have to pay a predefined amount of money in the form of premium.

Insurance PlanEntry AgePolicy termSum assured
Aditya birla sun life shield18/75 years10/20/30 year25 lakh / No upper limit
Aegon Life iterm plan18/75 years5/40 years10 lakh / No upper limit
Bajaj allianz i secure18/70 years10/30 years20 lakh / No upper limit
Canara hsbc i select + term Plan18/65 years10/30 years 25 lakh / No upper limit
Hdfc click2protect plus18/65 years10/30 years10 lakh / 10 crore

Popular FAQs

Q. What is an insurance premium paid by?

Ans – Premium is the amount your insurance company charges for the plan you choose. The payments are usually made on a monthly basis but it can be billed in several ways. To keep your coverage active you will have to pay your premium, whether you use it or not.

Q. How often do you pay an insurance premium?

Ans – Most major auto insurance companies provide coverage for six-month policy terms. This means that you will pay twice a year at the beginning of each new term. This allows for easy policy changes on behalf of the policyholder and also allows the carrier to increase the premium twice a year.

Q. What is the insurance premium?

Ans – In the simplest terms, insurance premium is defined as the amount the insurance company is going to charge you for the insurance policy you are purchasing. Insurance premium is the cost of your insurance.

Q. How is the insurance premium calculated?

Ans – The amount you pay is based on your age, the type of coverage you want, how much coverage you need, your personal information, your zip code and other factors.

Leave a Comment