5 Important Things to Know About Paying Life Insurance Premium
Buying a life insurancei policy is an importanti investment to provide youri loved ones with financiali security, even when youi are not around. Readi on to know ai few important things abouti paying the life insurancei premium.
Having a robust lifei insurance cover has becomei a necessity for all.i Today, many insurance companiesi and insurance aggregators offeri a wide variety ofi policies to suit thei needs of the customersi and each of thesei policies have a differenti premium. The life insurancei premium is essentially thei price you pay toi buy the policy. Whilei choosing the right insurancei policy, not many peoplei understand the significance ofi the premium. Also, noti many people know abouti the different aspects ofi premiums like what arei the different types ofi life insurance premiums? Howi often do you payi the premium? What arei the tax benefits available?i Having this basic knowledgei is essential to bei able to choose thei right insurance policy.
Let’s looki at the critical thingsi you must know abouti life insurance policy premiumi payment.
Discounts Based on thei Frequency of Premium Payment
Dependingi on the type ofi life insurance policy youi buy, insurance premium paymenti can be done oni a yearly, half-yearly, quarterlyi or monthly basis. However,i you must know thati the insurance companies increasei the premium amount basedi on the periodicity ofi the payment. So, ifi you choose to payi monthly premiums, it wouldi be higher than thei one-time annual payment. Oni the other hand, ifi you pay the premiumi in one go, thei insurance companies, offer ani attractive discount, which ini insurance terms is knowni as the rebate. Thei rebate in the annuali premium is adjusted ini the premium amount payable.
Additionali Premium for High-Risk Policyi Holders
For policyholders who doi not carry any risk,i the insurance companies chargei the usual premium rates.i However, for people whoi carry additional risk suchi as health ailments, thei insurance companies charge ani additional premium. Also, sometimes,i the additional premium isi charged when the policyholderi is involved in ai risky/hazardous occupation. Lastly, ifi you opt for additionali riders along with thei basic policy, you wouldi have to pay ani additional premium.
Rebates for Onlinei Payment
The insurance companies incuri a certain servicing costi every time you payi the premium; the servicingi cost for life insurancei policy premium payment onlinei is lower as comparedi to offline payment. So,i when you pay thei premium online, the insureri saves the commission paidi to the agents. Thei insurers pass this savingsi to the policyholders wheni they pay the premiumi online.
Non-payment of Premium
If youi fail to pay insurancei premium online before thei due date, the policyi will lapse and youi will not get anyi benefits. However, most insurancei policies provide a ‘gracei period,’ which is essentiallyi an extension of thei due date to payi the premium. You cani pay the premium duringi this grace period withouti incurring any additional chargesi and keep the policyi in force. If youi pay monthly premiums, fori all types of lifei insurance policies, except termi insurance, the grace periodi is 15 days. Fori yearly, half-yearly and quarterlyi mode of payments, thei grace period is 30i days.
Tax Benefit on Premiumi Payment
Under Section 80C ofi the Indian Income Taxi Act, the premium youi pay for the lifei insurance policy is eligiblei for deduction. However, thei deduction is applicable onlyi for the premium youi pay for the policyi taken towards protecting yourself,i your spouse and youri children.
Knowing the advantages ofi paying the premium onlinei or what are thei tax rebates available, willi greatly help you choosei the right mode ofi payment and reduce youri tax burden.