Features of Premium in Insurance

Premium or insurance premium is that money for which insurer provides financial security against risk on behalf of the insurance policyholder. Premium can be paid in one time or several times. The features of the premium of life insurance are given below

Definition of Premium in Insurance

Features of Premium in Insurance

Functions of Insurance

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 life is the main factor to calculate the premium. If 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 life is calculated in different ways. As for example the 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 an 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 the 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 on the management expenses of the insurance company. That is another important feature of the life insurance premium.

For sustainable life insurance, the premium is one of the key factors for ensuring the subject that has been insured by the insurance company.

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