Premium Loading, Rider Premiums

Premium Loading

The percentage of insurance premium deducted from the premium payments for universal life insurance policies to cover policy expenses, including the agent’s sales commissions. Depending on the universal policy design, the premium load may be a front-end load, back-end load, or a combination of the two.

The maximum coverage available under the insurance policy depends on the basic sum assured and the different types of riders included with your plan. However, it is important to remember that the total premium on various riders is not more than 30% of the premium paid for your basic policy.

Loading affects both life and health insurance. In a life insurance, the main factors that would determine your premium to be paid are the term of the insurance, type of policy and most importantly your age. This is because the possibility of mortality is higher for an older person, so a 50-year-old will be charged higher than a 20-year-old for the same policy. But you need not worry about the increase in insurance premium for the first 3 years, as the company cannot change it during that period, irrespective of the number of claims made. Sometimes the premium could be higher irrespective of your age. If a person is a habitual smoker, obese, diabetic or has an occupation that is life-threatening, the insurance loading will be higher than that of a healthy individual with an office job. This is because they hold a higher risk of dying younger or falling sick. Also, if an individual lives in a country with political unrest, he/she will be burdened with residential insurance. The basic idea behind loading is that

Factors:

• Age
• Smoking
• Medical State

Rider Premiums

A rider is an insurance policy provision that adds benefits to or amends the terms of a basic insurance policy. Riders provide insured parties with additional coverage options, or they may even restrict or limit coverage. There is an additional cost if a party decides to purchase a rider. Most are low in cost because they involve minimal underwriting. A rider is also referred to as an insurance endorsement. It can be added to policies that cover life, homes, autos, and rental units.

The maximum coverage available under the insurance policy depends on the basic sum assured and the different types of riders included with your plan. However, it is important to remember that the total premium on various riders is not more than 30% of the premium paid for your basic policy.

Some policyholders have specific needs not covered by standard insurance policies, so riders help them create insurance products that meet those needs. Insurance companies offer supplemental insurance riders to customize policies by adding varying types of additional coverage. The benefits of insurance riders include increased savings from not purchasing a separate policy and the option to buy different coverage at a later date.

Types

Waiver of premium rider: If you are unable to pay the premiums due to an accidental disability or loss of income, these future payments are waived by the insurer. Your inability to pay the premium does not result in the loss of coverage ensuring all benefits under the policy are available. If you do not include this rider and are unable to pay the premium on time, all the benefits offered by the insurance policy are lost.

Permanent disability rider: If you are permanently disabled in an accident, this rider is available. When you include permanent disability rider with your basic plan, the insurance company may pay a periodic amount to you for a certain period of time. You may combine this cover with the accidental death benefit rider. This rider provides you with an assurance of an income when you are unable to work due to an accidental disability.

Accidental death benefit rider: You may pay a single, limited, or regular premium for procuring coverage under this coverage. With the help of this rider, your beneficiaries receive the additional benefits, in case of an unfortunate incident due to an accident. There may be an upper limit on the maximum sum assured under the accidental death benefit rider, which varies from one insurer to another.

Income benefit rider: This rider is recommended if you are the primary earning member in your family. In case of an untoward event during the policy term, your beneficiaries receive additional income every year for a pre-specified period. This is available over and above the regular benefits available under your basic insurance plan.

Critical illness rider: When you include critical illness rider with your basic insurance, the policy pays a lump sum amount in case you are diagnosed with any of the illnesses covered under the plan. Some of the critical illnesses covered in this rider include heart attack, renal failure, cancer, coronary artery bypass, major organ transplant, paralysis, stroke, and several more. On a diagnosis of the covered condition, the insurance may either continue or end depending on the terms and conditions. Some insurers may provide lower coverage after reducing the amount paid to you as a lump sum on diagnosis.