Life Insurance Premium consists of three important factors, which an individual opting to purchase a life insurance policy should be acquainted with. These are mortality charges, sales & administration expenses and savings component. Mortality charges are incurred by the Life insurance Company to cover the risk of an uncertain eventuality to the individual. Sales & administration expenses are incurred by the insurance company for operational purposes and recovered from the premiums that the individual pays towards his policy. Savings Component portion of the premium is invested by the
life insurance company in various investment avenues like government securities (G-secs), bonds, money market instruments and equities in varying proportions. For an individuals benefit it is wise that he keeps his insurance needs and investment plans apart. This will also ensure a better and a more secure financial future. Insurance premiums need to cover both the expected cost of losses, plus the cost of issuing and administering the policy, adjusting losses, and supplying the capital needed to reasonably assure that the insurer will be able to pay claims.
When insured parties experience a loss for a specified peril, the coverage entitles the policyholder to make a 'claim' against the insurer for the covered amount of loss as specified by the policy. The fee paid by the insured to the insurer for assuming the risk is called the 'premium'. Insurance premium are of many types and depends on the kind of insurance policy you opt for. Life Insurance depends on the type and amount of insurance you buy & your chance of death while the policy is in effect which is determined by your lifestyle. In order to get the best premium rates one would want to be labeled as preferred risk taker or below average risk taker of early death. Life Insurance Companies remove a rated premium if you maintain good health for a specified period, give evidence that your health has improved, or change to a less-hazardous occupation. Being a non-smoker carries a strong advantage when looking for low life insurance rates.
Waiver of premium rider is a clause in an insurance policy that waives the policyholder's obligation to pay any further premiums should he or she become seriously ill or disabled. A waiver of premium allows people to benefit from an insurance policy, even when they cannot work. Most Life Insurance Companies incorporate a waiver of premium into a policy. The waiver is usually associated with
life insurance policies, and requires the policyholder to be disabled for a specified amount of time, such as being incapacitated for six months. To have a waiver of premium, some companies may also place other requirements on the policyholder, such as being healthy and below a certain age. All in all paying a good premium ensures that you have opted for a good life insurance policy that covers all monetary needs of your family incase of your death and hence maintaining their standard of living through out.
