Premium or insurance premium is that money for which insurer provides financial security against risk in behalf of the insurance policy holder. Premium can be paid in one time or several times.
The features
of the premium of life insurance are given below:-
Proposed
sum insured on the amount of claim:- If the amount of the claim is huge
then the amount of premium is huge. Again if the amount of the claim is small
then the amount of the premium is small. The main feature of the premium is
that the amount of the premium is depending on the amount of the claim.
Nature and
amount of Risk:- Risk of the life is main factor to calculate the premium.
If the life is risky then the premium is high but if the life is less risky,
then the premium is low. It is another
feature of the premium of life insurance.
The risk of the life is calculated in different ways .As for example:
profession of insured, physical condition and physical structure of insured,
personal and family history of the insured, residence etc.
Type of
insurance contract and of premium:-For the different kinds of insurance
contract the amount and number of installment are different. Again, for the
different types of premium the installment may be in different period of time.
So the type of insurance contract and of premium is played a vital role in
calculating the rate of installment.
Management
Expenses:- If the management expenses of the insurance company are cheaper
then the company can give the insurance policy in cheaper premium rate. So the
premium of life insurance also depends in the management expenses of the
insurance company. That is another important feature of the life insurance
premium.
For a sustainable life insurance, premium is one of the key
factors for ensuring the subject that has been insured by the insurance
company.
