Premium Payment Frequency in Term Insurance
Understand how the premium payment frequency affects your term insurance plan.
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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.
In a quarterly premium payment frequency, you pay your premiums every three months, or once a quarter.
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 the working of premium payment frequency.
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 Indian 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 premium 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 for 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 changing 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 depends 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.
Frequently Asked Questions (FAQs)
Here’s a list of common questions and answers related to premium payment frequency in Term Insurance.
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.
