10 Things You Must Know Before Paying Your Life Insurance Premium

What is Life Insurance Premium?

Life Insurance Premium refers to the fixed payment amount that the policyholder pays against the life cover that he chose to protect his loved ones. The life cover will be kept active for as long as the premiums are paid on time. Premiums differ from insurer to insurer, plan to plan and condition to condition. The policyholder’s age, gender, annual salary, tobacco habits, medical conditions, preferred life cover and policy term etc. are taken into consideration before the premiums are applied.

The premiums are generally paid in 4 modes:

• Monthly

• Quarterly

• Half-yearly

• Annually

Moreover, there are 3 premium payment terms, namely:

• Single

• Regular

• Limited

Things To Know Before Paying Your Life Insurance Premium

Below mentioned are a few points that you must consider before you pay your life insurance premium:

1. Paying Life Insurance Premium in Advance

   You need to pay the premium ahead of time to keep your life insurance policy in effect. You can pay with cash, a check, a demand draft, or online, but IRDAI rules say that cash payments can't be more than ₹50,000. Paying on time is very important because if you miss a payment, your policy could end. Most insurance companies make it easy to pay online, and some will give you a discount on your premiums if your policy has a higher sum assured. These rebates are possible because the costs of servicing all policies are about the same. This means that policies with higher values are better for you and cost less for insurers.

2. Rebates On Periodicity Of Premiums

   You can pay your life insurance premium monthly, quarterly, half-yearly, or once a year, based on what suits your income and budget. Paying more frequently usually incurs a slight increase in cost because it requires additional administrative effort for the insurer. When you pay the premium annually in one lump sum, the insurance company holds the money for a longer time and can earn better returns. Because of this, many life insurance companies offer a small discount or rebate on annual payments, which helps reduce the overall premium compared to paying it in smaller, frequent instalments.

3. Rebates Are Offered On Online Payment

   Servicing costs for premiums which are paid online are lower than for those which are paid physically. When premium is paid online, the company saves on the commission which needs to be paid to the agents as in case of policies which are physically sold. Varying across companies, rebates are offered on the online rates which are quoted. It has been witnessed that the rebate in case of online payments is higher than rebates which are offered on physical payments.

4. Extra Premium Is Charged In Some Cases

   For people who do not carry additional risk, the ordinary premium rates are applicable. However, in case of the people who carry extra risk, such as health problems like heart disease or diabetes the insurance company may charge extra premium. At times extra premium is charged when the policy holder is involved in a hazardous occupation. When the insured opts for additional riders with the base policy extra premium is charged.

5. Level Premium

   A level premium means the amount you pay as premium stays the same throughout the life of the policy. It does not increase with age or changing health conditions once the policy starts. This type of premium is commonly seen in whole life insurance plans, where coverage continues for the insured’s entire lifetime rather than for a fixed number of years. In the early years, the premium may feel slightly higher, but it helps balance the higher risk the insurer takes at older ages. Over time, this makes budgeting easier and gives long-term cost stability to the policyholder.

6. Tax Benefits On Paying Premium

   The premiums which you pay under a life insurance policy are eligible for deduction under Section 80C and 10(10D) of the Income Tax Act. The life insurance premium which you pay for your in-laws or parents is not eligible for deduction. In case you pay a premium for several policies, all the premiums can be included. The insurance premium which you pay for yourself, for your children or for your spouse qualify for deduction under section 80C.

7. Channels Through Which You Can Pay Your Premium

   Below mentioned are the ways to pay your premium:

   • Cheque

   • Credit Card

   • Internet/Mobile Banking

   • UPI

   You can download the instructions of premium payment from the insurance company’s website or collect it from their office. Additionally, if you find it difficult to remember your premium date, you can choose an auto-debit way. Further, some insurance companies also offer SMS alert facilities. This will ensure that you get reminders on payment of premiums by SMS.

8. Paying late or not paying the premiums

   When you have bought a savings plan for the long term plan and have not paid the premium timely, the benefits are not applicable.Though, insurance companies offer a grace period in which you pay the premium amount and ensure that the benefits can be received without extra charges. The savings plan will lapse after the grace period. Insurers offer the option to revive the plan after it got lapsed by paying the overdue premium amounts.

9. If You Forget Your Premium

   In case you forget to pay the premium, there is a grace period of 30 days. During the grace period the policy will remain valid. However, after the frace period, the policy will lapse. In case of eventualities the insurance company will not entertain claims. It is important to note that the policy can be revived within 5 years from the date of the last unpaid premium. You will have to pay the unpaid premium along with a penalty for late payment.

10. GST on Life Insurance Premiums

    As on 22nd September, 2025, individual life insurance premiums in India are exempted fully from GST i.e., 0%.

What Factors Affect Life Insurance Premiums?

• Age of the Policyholder and their Gender
  The age and gender of the person who buys the life insurance policy have a big impact on it. A 20-year-old will pay less for a ₹50 lakh term insurance policy than a 40-year-old will. In the same way, women pay slightly less in premiums than men because they live longer.

• Medical History of the Individual
  If you already have an illness or a family history of diabetes or high blood pressure, your health is at greater risk. So, people with a personal or family medical history have to pay more in premiums.

• Sum Assured
  The sum assured is the amount of coverage or benefit you choose when you buy life insurance. A higher sum assured means that the insurer will have to pay more if you make a claim, which naturally raises the cost of premiums.

• Policy Term
  The length of your life insurance policy affects how much you pay in premiums. The longer the policy term, the higher the overall premiums, since the insurer is covering you for a longer time. But the yearly premium rate may be lower in some long-term plans than it is on a per-year basis.

• Occupation Type
  Your job can affect how much you pay for life insurance, especially if you work in a dangerous field. Jobs that put people in danger, like mining, construction, the military, or firefighting, cost more to insure because they are more likely to cause injuries or deaths.

• Lifestyle Habits and Activities
  Insurance companies look into this a lot. If you often do risky or adventurous things like skydiving, scuba diving, mountain climbing, or racing, you might have to pay a lot for your insurance. This is because doing these things makes accidents and injuries more likely.

• Smoking and Tobacco Consumption
  Tobacco use and smoking have a direct effect on the cost of life insurance. Because tobacco users are more likely to get serious illnesses like cancer, lung disease, and heart problems, they are seen as high-risk people, which means they have to pay higher premiums.

• Alcohol Consumption
  People who drink a lot or are addicted to alcohol also have to pay higher premiums. This is because if you are addicted to alcohol, you probably already have health problems or will get some in the future. So, businesses charge more for their services.

Wrapping It Up!

Your timely premium payment determines how well you have maintained your life insurance policy. In case you outlive your life insurance plan without any lapsation, you will receive all your premiums back in the form of maturity benefits. Therefore, it is best to not leave your life insurance policy unattended and pay your premiums on time. You can always contact the customer care service if you have any questions or doubts regarding premium payment. However, Policybazaar makes sure you are up-to-date with all relevant information and reminds you of the scheduled premium payment date so that you can be free from the stress of missing the payment date.

Note: It is suggested to calculate the term plan premium on the term insurance premium calculator online tool by Policybazaar before buying.

Note: Check all the best term insurance plan in India.

Note: You should also check the benefits of term life insurance if you are planning to purchase the term insurance plan.