It’s important to pay premiums in advance: Here’s why
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A life cover.
And even savings or investments.
A life insurance policy helps you in these ways and more.
And what do you need to do in return? Nothing particularly tough - except pay your premiums on time. Unfortunately, many people often forget to pay their premiums on time. And that could lead to withdrawal of benefits.
Do you find yourself often falling behind on premium payments too? In that case, there's a very easy solution available - you can simply pay the premium in advance!
In fact, advance premium payments can help you in more ways than one. Check out the many reasons why it's important to pay premiums in advance.
It helps avoid policy lapses
What happens if you forget to pay your premiums on time? Well, insurers understand that this happens from time to time. So, you'll have a grace period during which you can still catch up on your payments. This period varies from one insurer to the next, but it typically ranges from 15 days to 30 days. If you remember and pay your premium within this period, that's all well and good.
But, what happens if your payment is delayed beyond the grace period?
Well, your policy lapses.
That means you no longer enjoy any of the benefits under the policy.
Paying your premium in advance can help you avoid this problem altogether. Simply put, this is how it goes.
- If you make advance payments, you won't have the problem of delayed payments.
- And that means you avoid policy lapses.
Easy as that!
You can freeze the premium amount before it's hiked up
Insurance companies may occasionally be forced to hike up premiums for certain products or types of insurance, based on various market factors.
For instance, the cost of reinsurance (i.e. insuring the insurance company) may go up. Or, due to events like an epidemic or a pandemic, insurance companies may start to see a higher number of claims.
When things like this happen, the effect of rising premiums is ultimately passed on to the policyholder. You can avoid the impact of these premium hikes - at least temporarily - by paying premiums in advance.
Advance payment helps avoid age group jumps
It's common knowledge that age affects the insurance premium. But did you know that the premium 'jumps' from one age group to the next? Let's explain this further.
In some plans, the premium amount tends to increase if the person crosses specific age brackets, such as:
- 0-18 years
- 19-30 years
- 31-45 years
- 46-55 years
- 56-60 years
- 60+ years
These age brackets may vary from one insurer to another. The amount of premium 'jumps' - if any - will also vary. You can cushion yourself against this, to a certain extent, with advance premium payments.
You could enjoy discounts on advance payments
Love discounts? Then, seeing the IRDAI's recent proposal, you may be in for some great discounted benefits. The insurance regulator has proposed that insurers should offer discounts on renewal premiums paid in advance.
- As per the IRDAI's draft proposal, this discount should be equal to the interest rate on the savings bank account deposit of State Bank of India (SBI).
- This rate is to be taken as of April 1 of each financial year - along with an addition of at least 0.01%
So, for example, if the interest rate on SBI savings bank accounts is 2.7%, the discount offered for advance premium payments must be 2.71% or higher.
Once this becomes applicable, you could enjoy discounts for paying your premiums in advance.
So, you see how something as small as changing your premium payment schedule can have such a huge positive impact? You can enjoy these advantages too, by simply making a small change in your payment routine. How simple, right?
Read next: WHY YOU SHOULD ALWAYS KEEP YOUR PAPERWORK READY AND UPDATED
Your premiums aren't the only things you need to be regular with. Paperwork is equally important too. Want to know more about the different scenarios when paperwork becomes important? We've got a guide that can help you.
PAY PREMIUMS FOR A SHORT PERIOD - AND ENJOY A WHOLE LIFE COVER UP TO THE AGE OF 100!
The shorter your premium payment term is, the lower the chances of you forgetting your dues, isn't it? And the ABSLI Vision LifeIncome Plan (UIN: 109N079V05) gives you the option to choose premium payment terms as short as just 8 years!
It's also never too late to purchase the plan, because the entry age goes up to 60 years. That's not all. The plan also offers you coverage till the age of 100!
1 Tax benefits are subject to changes in tax laws. Kindly consult your financial advisor for more details.
ABSLI Vision Life Income Plan is a traditional participating endowment plan.
ABSLI Life Shield Plan
A term insurance plan that offers you the flexibility of plan options suitable for your family's non- negotiable goals and ensure they need not compromise on their lifestyle. UIN: 109N109V06
- Choice of 8 plan options
- Cover your spouse under the same policy
- Longer Life cover till age 85
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