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Insurance Premium - Definition & Meaning

November 07, 2016 4340
The insurance premium is the sum of money an individual or business must pay for aninsurance policy. The amount of insurance premium that is paid out by the policyholder to the insurance company depends on a variety of factors.

What is Insurance Premium?

Insurance premium is a specified amount stipulated by the insurance company, which the insured individual should periodically pay to maintain the actual coverage of insurance.

As a process, insurance companies examine the type of coverage, the likelihood of a claim being made, the area where the policyholder lives, his employment, his habits (smoking for instance), his medical condition (diabetes, heart ailments) among other factors.

Insurance companies employ actuaries for the purpose of determining, for example, the likelihood of a claim being for a heart attack or cancer or another critical illness by individuals across various age groups and lifestyles. The greater the risk associated with an event / claim, the more expensive the insurance premium will be.

Insurance companies offer policyholders a number of options when it comes to paying insurance premium. Policyholders can generally pay the insurance premium in installments, for example monthly or semi-annual payments, or they can even pay the entire amount upfront before coverage starts.

In case of non-life insurance, like auto insurance for instance, the annual insurance may be reduced following a no-claim year. Conversely, the premium can rise following a claim year.

 

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HDFC Life Insurance Company Limited. CIN: L65110MH2000PLC128245, IRDAI Reg. No. 101.

Registered Office: Lodha Excelus, 13th Floor, Apollo Mills Compound, N.M. Joshi Marg, Mahalaxmi, Mumbai 400 011. Email: [email protected], Tel No: 1800-266-9777 (10 am to 7 pm). The name/letters “HDFC” in the name/logo of the company belongs to Housing Development Finance Corporation Limited (“HDFC Limited”) and is used by HDFC Life under an agreement entered into with HDFC Limited.

For more details on risk factors, associated terms and conditions and exclusions please read sales brochure carefully before concluding a sale.

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