The insurance premium is the price of the insurance, that is, the price that the insured pays for the coverage that he receives from the insured risk to his insurance company. In this way, the insurance company, when collecting the premium, is force to comply with the coverage stipulate in the insurance policy.
The obligations of the parties to the insurance contract, in this sense, would be:
- the policyholder (the company’s client) is oblige to pay the premium in accordance with the conditions described in the insurance policy.
- The insurance company undertakes to indemnify or satisfy a capital, an income or other agreed benefits in the event that the event occurs whose risk are subject to coverage.
What does the price of the premium depend on?
First of all, the amount of the premium depends on the type of risk insured and is fixed in advance by the insurance company. In addition, the price of the premium must be sufficient for the insurer to deal with the insured claims.
But the type of risk is not the only variant that determines the price or amount of the premium charged by the insurance company. Other factors to consider are:
- Contract period
- the insured capital
- factors specific to the type of insurance
This last point is very broad, and depends on the type of insurance or the insured property. For example, in the case of car insurance, the factors that will influence the calculation of the insurance premium, in addition to those described, will be:
- Driving history
- Use given to the car and number of km traveled per year
- Address of the insured
- driver’s age
- vehicle type
How does life insurance work?
- Life insurance is a type of policy that is written in order to guarantee the financial stability of a family after the death of the main income earner. Of course, there are other powerful reasons for taking out insurance with these characteristics, such as settling outstanding debts or serving as collateral for contracting other financial products. As its name expresses, this insurance can only be collect after the death of the insure, who will previously have state who will be its beneficiaries.
- Life insurance can have a variable amount, depending on the degree of coverage that the policyholder wants or the premium that they are willing to pay. As with any other policy, there are different variables that can affect the cost of the insurance, such as the age, medical history or work activity of the insured. The policyholder can also choose between different modalities, such as ordinary, variable or universal insurance, among others.
- Beneficiaries are usually people close to the insure, such as children or spouse, although current legislation allows not only natural persons but also legal entities (such as companies, for example) to be establish as beneficiaries. The compensation established in the policy can be collected all at once or converted into regular income, although in this case the beneficiaries will face different tax obligations.
- The policyholder is responsible for assuming the premium established at the time of signing the life insurance, while providing the information required by the insurer. It is always advisable that the beneficiaries know of the existence of this policy because they will only receive compensation if they request it from the corresponding insurer.
Term Life Insurance
It is aim at covering your insurance needs for a certain period of time, usually 10, 20 or 30 years. It pays your designated beneficiary a death benefit, and does not accumulate values. You can get the insurance with level premiums, in which the premium will not increase during the coverage period. In many cases you can convert your insurance to a permanent cover policy. This coverage suits you if you have a need that you want to cover only for a certain period of time.
Permanent Life Insurance
It protects you throughout your life, as long as you continue to pay the corresponding premiums. Permanent Life Insurance accumulates values and is the ideal product if you have a need for long-term insurance. There are several types of Whole Life Insurance that can be tailored to your individual needs.
- Whole Life Insurance – It is ideal for you if you want to have a death benefit and a guaranteed return on accumulated values. Whole Life Insurance also offers you the convenience of a fixed premium for life and the possibility of receiving dividends.
- Universal Life Insurance – If you want flexibility, this product may be the one for you. In life there are times when we have good cash flow and other times we don’t. With Universal Life insurance, you adjust your premiums according to your pocket. It also allows you to adjust the death benefit. The policy can accumulate values, although they are not guarantee.
