Insurance premiums are determined on the basis of of the total price of the insurance policy. Different insurance providers offer different premium options,insurance premiums are periodical payments which an insurance holder needs to pay. The insurance agents should provide a clear idea about the insurance premiums and it is prudent to have a clear insight about insurance premiums before buying an insurance. With a definite idea about the premium structure,individuals can prioritize own needs and then can decide about the suitable insurance cover.
According to investorwords.com, insurance premium may be defined as “The periodic payment made on an insurance policy”. Insurance premiums are integral part of insurances,three most essential elements associated to premiums are as follows:
• Components related to savings:
An insurance company generally invest a particular amount of the premium in diverse financial instruments and money market instruments. A considerable portion of the premium may be invested in government securities and equities,bonds etc. This help in providing policyholders certain returns and bonuses during the time of maturity.
• Operational expenditures:
For different operational purposes ,insurance companies spend certain amount and these costs are recovered from the premiums Some operational expenditures are as mentioned below:
- Commission to agents
- Overhead costs
- Sales and marketing expenditures
• Mortality charges:
Mortality charges are taken by the insurance corporations from the policyholders,mortality expenses can largely differ depending on the individual's age,the total sum assured etc.
In generic,insurance premiums are collected in monthly or half-yearly basis. Insurance rates remain in state of flux,rates can remain same or even may changes within a billing cycle. Insurance companies are empowered to cancel the entire policy whenever a policyholder fails to pay the periodical dues. Any changes or alterations in premium amount is informed to the consumers. Insurance premium amount depends upon few factor like level of coverage,risk management techniques and price value of the insured asset. In case of small losses,it is not advisable to file insurance claims as claims can increase the insurance premium amount. In these days of online communication,there are several online premium calculators and it is possible to calculate different premium amounts with a few clicks of mouse.
