Premiums are the dollar amount you pay into a life insurance policy. Depending on your arrangement with the insurance company, you can pay premiums on a monthly basis or less often. All policies must contain a 31-day grace period for late payments. This means if you are late paying your premium, your policy still stays in effect for 31 days, until you pay your premium.
For group life insurance, employers can deduct your premiums with your permission from your paycheck.
Insurers base your life insurance premium on several factors:
• Age
• Health problems
• Occupation
• Hobbies
• Habits
• Other circumstances that may reduce your life span, such as a bad driving record or participating in dangerous activities
• Expenses the company expects to pay regarding your coverage, such as sales charges, and underwriting and administration costs
• Interest the company expects to earn from investing your premiums
What you should know about life insurance policies
A life insurance policy is a legal contract between you and the insurance company. This contract spells out:
• The rights and duties of you and the company
• How much and how often you pay
• The benefits you are entitled to receive
• The circumstances under which the policy will pay benefits
The best insurance policy is the one that best fits your needs. However, what is best for you right now, may not suit your situation 1 0 years from now. This means you should review your coverage regularly, even on an annual basis to make sure your coverage is current.
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