What is adjustable life insurance?

Adjustable life insurance is an insurance option that makes it easy for policyholders to change the amount and scope of coverage offered by the policy, while changing the monthly premium. Generally, life insurance of this type allows for adjustments in premiums, the period of protection, and the face amount associated with the policy. In some cases, the policy may also allow the policyholder to change the premium payment terms, such as going from a monthly payment to a quarterly payment.

It is important to note that most adjustable life insurance policies allow you to decrease or increase the benefits associated with them. This can be very helpful for someone who is unemployed for an extended period of time and has to keep an eye on all expenses. Instead of having to drop coverage, the insured opts for a lower benefit schedule and gets a lower premium that is more manageable. At a later date, when financial circumstances improve. The policyholder can change the terms of the policy again to restore the previous level of coverage.

While this type shares some features with variable life insurance. The two are not identical. Variable life insurance allows the amount of the death benefit to fluctuate based on the performance of the investments underwriting the coverage. In contrast, adjustable life insurance does not include a floating death benefit. Instead, the amount of the death benefit is set according to the terms and conditions of the policy.

Terms of quality

In terms of quality, adjustable life provides benefits that are comparable to other forms of life insurance coverage. The plan provides some flexibility for the policyholder to modify coverage as life circumstances change. For example, an adult with an adjustable policy may choose to increase coverage after getting married or having children. Similarly, an insurance package allows a low-income person to purchase coverage from time to time. Then gradually increase benefits as annual salary or wages increase over time.

Many insurance companies offer this type of insurance coverage in conjunction with other plans. People who may be interested in this type of policy should speak to an insurance agent for more details on. How their adjustable plans work and what kind of flexibility is available with the plans.

Understanding insurance: what is a policy premium and how is it calculated?

The insurance premium is the amount that the policyholder must pay to the insurance company as consideration for the services provided. That is, in exchange for the commitment that the insurance company will pay a consideration to the beneficiaries. The policyholder is contractually obligated to pay the premium under the terms agreed between both parties.

The premium can vary considerably from one insurance contract to another. Given that its amount is directly proportional to the risk assumed by the company. And this, in turn, depends on the insured value, the time, the probability that a claim will occur, among others. other factors. Next, we explain the different types of premium and the most important details for its calculation.

How is the insurance premium calculated?

The insurance premium is calculated based on the estimate of the insured risk of what is called the “pure premium”. This initial component is the result of calculating the average theoretical probability of a claim occurring and estimating the impact of the economic value. Which allows knowing the average amount to be paid for each claim.

To the “pure premium” the companies add other additional amounts for various concepts and thus the definitive premium is reached. Which is the total amount paid by the client for the cost of the insurance. The “inventory premium” is added. Which includes internal management and administration expenses. Aimed at covering the cost of all internal operations that the insurance entails for the company (including commissions, advertising expenses, etc.).

The part corresponding to the safety margin is also added, to be covered in the event. That the assumptions made in the estimates suffer a significant variation; the commercial margin. Which will allow you to obtain an economic benefit, as does any company in another sector; and the expenses of redistribution of the insured risk, coinsurance and reinsurance. In which the company incurs as a result of its activity.

How should I pay the insurance premium?

The total amount of the insurance premium must be paid by the policyholder to the insurance company. Either directly or through an agent, at the time of signing the policy. In the case of dealing with an exclusive agent of the company. The amount that the policyholder pays him for the insurance is considered as payment of the premium.

If he is a non-exclusive agent, until the policyholder has proof of payment from the agent to the insurance company. Through a receipt or proof issued by the latter, the insurance premium is not considered paid. Therefore, the insurance may not have effect.

The most normal thing is that the premium is paid through a direct debit. As it is the most practical payment method, although if nothing is indicated in the policy. The payment is understood to be made at the policyholder’s address.

In the event of non-payment of the premium, the insurance will be suspended on the fifth month and upon completion of the sixth. The contract will be rescinded, and the company may initiate legal action against the policyholder.

What types of insurance premium exist?

There are different types of insurance premiums, depending on what is agreed in the policy between the policyholder and the insurance company. Thus, depending on the frequency of payment, the premium can be periodic or variable.

In the periodic one, the policyholder and the company agree to pay the premium in installments at different times during the term of the insurance. For example, the monthly payment of life insurance. In the single premium, policyholder and company agree that the premium is paid in a single installment during the term of the insurance. For example, in loan payment protection insurance. The full installment is often paid when the financing is arranged.

In addition, the premium can be fixed or variable, depending on the evolution of the insured risk. For example, in home insurance. The premium may vary if new items are added to the insured inventory. If reforms are made that increase the value of the home.

Finally, there is the fractional premium, which is calculated based on a temporary period of one year but whose insurance has a shorter term. For example, this is the case of the accident insurance that many people take out when they go skiing. The premium is paid only once, depending on the number of days the insurance is contracted.


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