{"id":14158,"date":"2026-05-27T07:38:45","date_gmt":"2026-05-27T07:38:45","guid":{"rendered":"https:\/\/lemonn.co.in\/blog\/glossary\/insurance-premium\/"},"modified":"2026-05-27T07:38:45","modified_gmt":"2026-05-27T07:38:45","slug":"insurance-premium","status":"publish","type":"glossary","link":"https:\/\/lemonn.co.in\/blog\/glossary\/insurance-premium\/","title":{"rendered":"Insurance Premium"},"content":{"rendered":"

An insurance premium<\/a> is the amount you pay to an insurance company in exchange for coverage. It can be paid monthly, quarterly, half-yearly, or annually. The premium<\/a> keeps your policy active. If you stop paying premiums, most policies lapse and you lose the coverage.<\/p>\n

What Is an Insurance Premium?<\/h2>\n

The premium is the price of insurance. When you buy a policy, you agree to pay a set amount regularly, and in return, the insurer agrees to pay the sum assured<\/a> or cover your losses when a valid claim arises.<\/p>\n

Premiums are calculated based on the risk the insurer takes. Higher risk means a higher premium. A 55-year-old with a history of heart disease pays more for health insurance<\/a> than a 28-year-old with no medical history.<\/p>\n

What Determines Your Premium?<\/h2>\n

**Life insurance<\/a>:**
\n– Age (older age = higher premium)
\n– Sum assured
\n– Policy tenure
\n– Lifestyle factors (smoking, hazardous occupation)
\n– Medical history<\/p>\n

**Health insurance:**
\n– Age of the insured and family members
\n– Pre-existing medical conditions
\n– Sum insured
\n– Add-ons selected (maternity, OPD, zero co-pay)<\/p>\n

**Motor insurance<\/a>:**
\n– Vehicle make, model, and age
\n– Insured Declared Value (IDV)
\n– No Claim Bonus<\/a>
\n– City of registration<\/p>\n

Premium Payment Modes<\/h2>\n

Most insurers offer:
\n– Annual premium (usually slightly discounted)
\n– Monthly ECS or NACH debit<\/a>
\n– Quarterly payment
\n– Single premium (for certain products)<\/p>\n

Premium Calculation Method<\/h2>\n

Insurers use actuarial science to price policies. They analyse large sets of data on claims, mortality rates, health trends, and economic conditions to determine the expected cost of covering a group of policyholders. The premium must cover expected claim payouts, operating costs, and a margin for the insurer.<\/p>\n

Tax<\/a> Benefit on Premiums<\/h2>\n

– Life insurance premiums: deductible under Section 80C<\/a> up to Rs 1.5 lakh
\n– Health insurance premiums: deductible under Section 80D up to Rs 25,000 (Rs 50,000 for senior citizens)
\n– Motor insurance premiums: deductible as business expense<\/a> if the vehicle is used for business purposes<\/p>\n

Practical Example<\/h2>\n

Ananya, aged 32, buys a term life insurance policy of Rs 1 crore for 30 years. Her annual premium is Rs 12,500. She also buys health insurance for Rs 20,000 per year. Total annual insurance spend: Rs 32,500, all deductible under Sections 80C and 80D. For the Rs 12,500 life insurance premium, the tax saved (at 20% slab) is Rs 2,500.<\/p>\n

Key Takeaways<\/h2>\n

– An insurance premium is the regular payment that keeps your policy active
\n– It is calculated based on the risk profile<\/a> of the insured, the sum assured, and the policy type
\n– Paying premiums on time is essential; a lapse in payment can cancel coverage
\n– Life insurance premiums qualify for Section 80C deduction; health insurance premiums qualify under Section 80D
\n– Compare premiums across insurers for similar coverage using online aggregators before buying<\/p>\n","protected":false},"excerpt":{"rendered":"

An insurance premium is the amount you pay to an insurance company in exchange for coverage. It can be paid monthly, quarterly, half-yearly, or annually. The premium keeps your policy active. If you stop paying premiums, most policies lapse and you lose the coverage. What Is an Insurance Premium? The premium is the price of […]<\/p>\n","protected":false},"author":3,"featured_media":0,"menu_order":0,"template":"","meta":{"_uag_custom_page_level_css":"","footnotes":""},"class_list":["post-14158","glossary","type-glossary","status-publish","hentry"],"blocksy_meta":[],"uagb_featured_image_src":{"full":false,"thumbnail":false,"medium":false,"medium_large":false,"large":false,"1536x1536":false,"2048x2048":false,"web-stories-poster-portrait":false,"web-stories-publisher-logo":false,"web-stories-thumbnail":false},"uagb_author_info":{"display_name":"Team Lemonn","author_link":"https:\/\/lemonn.co.in\/blog\/author\/ashu\/"},"uagb_comment_info":0,"uagb_excerpt":"An insurance premium is the amount you pay to an insurance company in exchange for coverage. It can be paid monthly, quarterly, half-yearly, or annually. The premium keeps your policy active. If you stop paying premiums, most policies lapse and you lose the coverage. What Is an Insurance Premium? The premium is the price of…","_links":{"self":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary\/14158","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary"}],"about":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/types\/glossary"}],"author":[{"embeddable":true,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/users\/3"}],"version-history":[{"count":0,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary\/14158\/revisions"}],"wp:attachment":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/media?parent=14158"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}