Premium Frequency (Premium Periodicity)

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Definition

Premium frequency is the frequency at which the premium is paid to keep the life insurance in force. The proposer can choose to pay the premium on annual, semi-annual, quarterly or monthly basis within a year.

Description:

Any proposer at the time of buying a life insurance policy considers its sum assured, premium amount, the scope of cover, and payout. The purpose is to arrange for financial security without disturbing the monthly budgets for other household expenses.

A proposer has the flexibility to choose to pay the premium annually, that is, once a year if they have a good earning capacity or are in a seasonal occupation. Similarly, people who spend wisely every month can decide to pay monthly premium instalments. The idea of dividing premium payments as per convenience is premium frequency.

Premium frequency is the number of times you pay the premium for an insurance policy within a year. It is a convenience that is offered to the insured to motivate them to buy the insurance policy.

In life insurance, when premium frequency is shorter, insured ends up paying more premium than the annual premium amount. So once you are settled and can afford yearly or annual premium payments, you can place an endorsement request for change in premium frequency.

Example:

Ajeet was a travel organiser and earned ₹30 lakhs per year. But the amount he earned majorly came in the winter season. While he was away for his work, he remained worried for his family. He then decided to purchase an endowment plan for the policy term of 15 years. Ajeet could afford the bulk premium payment and hence he chose the premium frequency yearly, in which Ajeet had to pay the premium of ₹8790/- every year. Till the end of 15 years, Ajeet would pay the premium every year on policy anniversary date.

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