Life Insurance Premiums
Life insurance is a contract between an individual and an insurer wherein the insurer has to pay a sum of money to the insured person at the occurrence of his death. For this, the insured person or the insurance policy owner is required to pay a stipulated sum of money to the insurer in the form of life insurance premiums. Thus life insurance is also said to be a type of investment where you go on investing your money in the form of regular premiums and at the maturity of the policy or when some event takes place the entire mentioned amount is returned. Thus as in any investment option life insurance premiums also have to be paid on a regular basis. The premiums that you have to pay depend on your policy amount and the duration of your policy. Also a life insurance premium is dependent on the age of the policy owner. So now lets find out some more information on the life insurance premiums in general and all the different types of life insurance premium options available.
Life Insurance Premiums
As mentioned above life insurance premium is a sum of money that a policy owner is required to pay to the insurer in return of the life insurance policy provided by the insurer. These premiums have to be paid on a regualar basis to the insurer. As these premiums get accumulated, life insurance is also known as a type of investment. A life insurance premium to be paid depends on some factors. These factors include your life insurance policy value/amount, your life insurance policy period and also the age at which you are taking a life insurance policy. Life insurance premium also depends on the age and thus as the age goes on increasing the premium have to be paid increases. Thus it is advisable to get an insurance policy at an early age.
Types of Life Insurance Premiums
There are two basic types of life insurance premiums. These types depend on the amount that you have to pay to the insurer. These are stepped premiums and level premiums.
Stepped Premiums:
Stepped premiums depend on the age of the policy holder and tend to increase with their age. Thus as the policy owner gets older the amount to be paid as premium also increases and with increasing age the premiums get quite high. Below are mentioned the rates at which these premiums tend to increase.
20 to 30 years - no much increase or very little, if any, every year.
30 to 40 years - an average of 6% increase in the premium amount every year.
40 to 50 years - an average of 8% increase in the premium amount every year.
50 to 60 years - an average of 11% increase in the premium amount every year.
60 years and above - an average of 15% increase in the premium amount every year.
Level Premiums:
In level premiums the premium amount remains same till the age of 65 as long as the cover remains constant. Thus in this type of premiums the amount does not change with the age of the policy owner.
Mode of payment
There are 3 choices for the payment of life insurance premiums. A life insurance may provide at least 1 or all of these payment options. These modes of payments for life insurance premiums are
- through cheques or money orders
- through credit cards
- through direct debit from your bank account.