Premium, Methods of Premium, Single Premium, Level Premium, Limited Premium, Flexible Premium Plan

1. PREMIUM
BY
DESI PRIYA V
ASSISTANT PROFESSOR
ETHIRAJ COLLEGE FOR WOMEN

2. PREMIUM
• Price for insurance
• Consideration amount paid by insured
• One time payment or at a regular periodical intervals
• Payable in advance
• Default in premium payment

3. CONTI…..
PREMIUM MUST BE SUFFICIENT TO MEET OR COVER THE FOLLOWING EXPENSES:
• Expected Claims
• Reserve for Outstanding Claims
• Provision for the Clients' Acquisition Costs and Management Expenses
• Provision for Tax Liability
• Reasonable provision for Contingencies and Profit margin must be made

4. COMPONENTS OF PREMIUM
A Premium consists of Three Portions:
1. Mortality
2. Expenses
3. Investment

5. CONTI…..
• EXPENSES PORTION:
1. Mortality Charges
2. Rider Charges
3. Premium Allocation Charges
4. Fund Management Charges
5. Policy administration Charge
6. Service Tax Charge
7. Top-Up Charges

6. CONTI……
OTHER CHARGES:
1. Surrender Charges
2. Switching Charges
3. Miscellaneous charges

7. PREMIUM PAYMENT MODES
• SINGLE PREMIUM
• LEVEL PREMIUM
• LIMITED PREMIUM
• FLEXIBLE PREMIUM PLAN

8. CONTI…..
1. SINGLE PREMIUM:
• Payment of single cash sum
• Not popular
2. LEVEL PREMIUM
• Not single premium
• Payable until maturity
• Life policy of any duration

9. CONTI…..
• Annually, half yearly, quarterly or monthly
• Financing life insurance on instalment basis
3. LIMITED PREMIUM:
• Premium paid for a lesser period
• Risk is covered for entire period
• Premium is higher compared to level premium

10. CONTI…..
• Premium payable = actuarial equivalent of the premium payable
• Contract varies between single and level premium
• Suitable for professionals
4. FLEXIBLE PREMIUM PLAN:
• Flexibility of deciding the amount of premium
• Subject to company rules
• From the amount paid, premium will be deducted
• Policy cash value

11. COMPUTATION OF PREMIUM
• Complex arithmetic
• Technical processing of actuarial and statistical principle
• Actuary
1. Risk Premium
2. Net Premium or Pure Premium
3. Office Premium
4. Tabular Premium

12. CALCULATION OF AGE OF LIFE ASSURED
1. Human Life Value Approach
2. Need-based Approach
3. Multiple Approach

13. THANK YOU