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Premium Payment Frequency In Term Insurance

TeamAckoMay 21, 2024

With a life insurance policy, you secure your family's financial future in case you suddenly pass away. Most policies offer a death benefit or sum assured to your loved ones to keep them financially independent and help them get back on their feet. Here, a Term Insurance policy covers you for a term, or a certain number of years. Usually, most Term insurance policies are from anywhere between 1 to 30 years. To keep the policy active, you need to pay an insurance premium. Read ahead to learn more about the premium payment frequency in Term Insurance.

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What is a Premium Payment Frequency?

A premium payment frequency in Term Insurance policy is how often you have to make your premium payments. Most insurance companies offer you premium payment frequencies as follows.

  • A monthly premium payment frequency is when you pay your premiums monthly.

  • You pay your premiums every three months or once a quarter in a quarterly premium payment frequency. 

  • Semi-annual premium payment frequencies are premium payments made twice a year.

  • Finally, an annual premium payment frequency is when you pay your premiums once a year.

The different types of frequencies will also determine your entire premium payment amounts. Generally, annual payments offer the lowest premium amounts because there are usually yearly discounts available to you. Paying in smaller amounts more frequently usually costs more because of the higher number of payments you will have to make.

How does a premium payment frequency work?

The following points will explain how premium payment frequency works.

Rebates on payments

You can get rebates when you pay your premiums online. Usually, online payments help your insurance company save big on processing fees and finances, so they pass the savings on to you. You can get rebates for premium payments that you make towards a higher sum assured value.

Premium payments

According to the India Insurance Regulatory and Development Authority (IRDA), you can make premium payments in cash only for amounts up to Rs. 50,000. Premium payments beyond this amount need to be made via netbanking, check, or online payments.

Premiums depend on your health and lifestyle

Your premium values are based on your health status and lifestyle habits. The healthier you are, the lower your premiums will be. When you apply to purchase a policy, you will have to undergo a medical check to assess your health and screen for any pre-existing medical conditions. What's more, you will be asked about your smoking and drinking habits. These measures are used to determine your risk value to the insurance company and how much they will have to pay as premiums for your policy.

Loading issues

If you're deemed as high risk to your insurance company and the policy you're looking for, you'll be issued a loading condition. Loading is used in policies for people with health conditions, who work in hazardous environments, and/or with hobbies labelled dangerous or risky. The higher the loading amounts for your policy, the more you'll have to pay in premiums.

Level premiums

Term Insurance policies offer you level premiums. A level premium is a premium payment amount that stays the same for the duration of your policy. Even if interest rates affect the market or if currency values change, your premium payments will be the same until your term policy expires. One of the benefits of a level premium is that you don't have to worry about external factors influencing your payments.

Grace period

Insurance companies stipulate that you make your premium payments on time. In case you miss a payment, you can still use the premium payment grace period. The grace period allows you a certain number of days to make your payment. Usually, a grace period is around 15 days, although this depends on your insurance company. If you miss the grace period payment as well, your policy may lapse or be terminated.

How can I change my premium payment frequency? 

You can change your premium payment frequency in term insurance according to your needs. Most insurance companies state that you can change your premium payment frequency on your policy's anniversary. Renewing or amending your policy is easier when it's done on the date you bought your policy for internal finance purposes.

Ways to change your premium payment frequency 

Although the steps to change your premium payment frequency depend on your insurance company, most follow a basic set of steps.

 Online method:

  • Go to your insurance company's website. You may need to log in, depending on your insurance company. 

  • Most websites provide a premium payment gateway where you can submit requests to change or update your premium payments. 

  • Apply for a premium payment frequency request, usually on your policy's anniversary. 

  • Your insurance company may require certain documents that you will need to submit to initiate the change request.

Offline method:

  • Visit your insurance company's branch in person to submit an offline change of premium payment frequency request. 

  • Your insurance company will request a few documents in order to process your change request. 

  • As with the online request, you may need to apply for the change in payment on your policy's anniversary date.

Regarding premium payment, the ACKO Life Flexi Term Plan offers various premium payment options, giving flexibility in how frequently you choose to make payments. With this unique plan, you also have the freedom to adjust the sum your family would receive, the duration of the plan, and the manner in which the funds are disbursed to your family—all conveniently managed through the ACKO App with just a click.

Common Misconceptions about Premium Payments

There are several misconceptions about premium payments:

  1. More Payments Mean More Coverage: Some believe paying premiums more frequently increases coverage levels, which is false. The coverage you receive is defined by the terms outlined in your policy rather than how often you make payments.

  2. Immediate Policy Cancellation on Missed Payment: Another common myth is that missing a premium payment will immediately cancel the policy. In reality, most policies have a grace period allowing policyholders to make up for missed payments.

  3. Lower Premiums for Healthier Individuals Always: While healthier individuals often enjoy lower premiums, this advantage can vary significantly across different insurers and policy terms.

Tips for Managing Premium Payments Efficiently

Efficient management of premium payments ensures that your policy remains in force without causing a financial burden. Here are some tips:

  • Automate Payments: Set up automatic debits from your bank account to ensure payments are never missed.

  • Calendar Alerts: Use digital calendars to set reminders for due dates, especially if you pay quarterly or annually.

  • Consolidate Payments: If you hold multiple policies, consider synchronising payment dates to streamline your finances and reduce the chance of forgetting a payment.

Legal and Tax Implications of Premium Payments

Premium payments for term insurance can also carry legal and tax implications, which are important to consider:

  • Tax Deductibility: In many jurisdictions, the premiums paid on term life insurance can be tax-deductible. This depends on local tax laws and should be confirmed with a tax professional.

  • Legal Documentation: Ensure all premium payments are well documented. This helps in legal scenarios where proof of continuous coverage, such as estate planning or financial audits, might be required.

Frequently Asked Questions 

Here’s a list of common questions and answers related to premium payment frequency in Term Insurance.

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What is a premium payment frequency in Term Insurance?

A premium payment frequency in Term Insurance is how often or the number of times that you need to pay for your premiums. Insurance companies offer convenient payment frequencies which include monthly, quarterly, bi-annually, and annually.

How is a premium payment calculated?

Your premiums are determined according to certain criteria that your insurance company lists out. These criteria may include your health and lifestyle habits, age, gender, and job or income details. The lower the risk you present to your insurance company, the lower your premiums will be. 

What happens if I miss a premium payment?

In case you miss a premium payment, you still have a grace period to pay in. Although grace period times depend on the insurance company, they're generally about 15 days from your actual premium payment date.

Can I change my premium payment frequency?

Yes, you can change your premium payment frequency to suit your changing lifestyle and needs. You may apply online or in person at your insurance company’s branch office.

Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on industry experience and several secondary sources on the internet, and is subject to changes.

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