Life Insurance Policies According to Premium Payment

The policies according to the premium payment may be of the following types:

1. Single Premium Policy

In this policy, the whole premium is paid at the beginning of the policy. As compared to the annual premium payable, it is costlier; but as compared to aggregate of all annual premiums payable, it is much smaller because all the premiums are received in advance and the insurer can earn additional amount on the premiums received.

This type of policy can be afforded by those who got a windfall income and are expected not to continue such return in subsequent years.

The single premium policy is not useful to other persons because of chances of death whereafter the subsequent premiums are not required to be paid.

2. Level Premium Policy

Under this policy regular and equal premiums are paid at definite interval. This premium is lesser than the single premium and is convenient to make premium at a regular period.

This may take the shape of an expense and can be constantly paid. The equal instalments may be paid monthly , tri-monthly (quarterly), half yearly and yearly.

So, it suits the requirements of different types of the policy-holders. Since, originally the premium is calculated and charged on annual basis, the unpaid premiums for the year are required to be paid at the time of payment of claims due to death.

The amount of each monthly, quarterly and half-yearly is not just the one twelfth.

One-fourth and one-half of the annual premium because the insurer is involved in more expenses while collecting more frequent premiums and is a loss of the interest for the balance of the annual premium.

For monthly installments an additional charge of 5 per cent on the annual premium is made to cover loss of interest and additional cost of collection.

The additional charge of 5 per cent of the premium shall be waived if the premiums are paid through a co-operative society or by trustees of a staff provident or superannuation fund or are collected by deduction from salary and remitted by or under the supervision of the Corporation.

If premiums are payable yearly or half-yearly reduction of Re.0.75 and Re.0.50 per thousand of sum assured is ordinarily deductible from the annual premium.

There is no deduction or reduction in the quarterly premium. The level premium policy may be either a continuous level premium or a limited level premium policy.