Meaning and definition of Premium (Insurance Law)

Introduction -

Insurance is a Contract, there are two parties in the contract of Insurance, Insurer and
Insured. The insured gives premium as a consideration in return of which insurer
undertakes to pay a certain amount at a specified contingency. There is no precise
definition of the Insurance Contract, Several Jurists tried to define it. Some of the
Important Definitions are given here.

Meaning of Premium -

Premium is a price that insurer charges from the insured, either lumpsum of or in
installments assured for covering some certain or ascertainable perils or risks. The
price varies from insurer to insurer, as with any product or service.

Different types of insurance cover require different premiums based on the degree of
risks.

Illustration -

A policy insuring a house valued at $50,000 for fire requires a higher premium that
one insuring a bike valued $25,000.

Although the degree of risk insured might be similar, the cost of repairing the house
is much higher than the bike and this difference is also seen in the premium paid by
the insured.

Definitions of Premium -

According to the MacMillan Dictionary, " regular payment made to an

insurance company so that you are protected by the insurance."

National Insurance Company Limited defines premium as, "premium is fixed

amount of sum paid over the period by ensured to the insurer in order to secure an
insurance policy and to complete the contract of insurance
 In Lucena Vs Crawford, Lawrence J defined premium as "a price paid adequate
to the risk".

Generally, the premium is paid in cash. But it is up to the insurer to accept the
payment in any other modes such as cheque, promissory note, bill of exchange, credit
card, post, etc.

Mode of Payment of Premium (Insurance Law)

What is Premium -

It is the sum Payable (usually annually) by the insured to the insurer under a contract
of insurance.

Meaning and Definition of the Premium -

According to the Macmillan dictionary, " regular payment made to an insurance

company so that you are protected by the insurance."

National Insurance Company Limited defines premium as, "premium is fixed

amount of sum paid over the period by ensured to the insurer in order to secure an
insurance policy and to complete the contract of insurance

Mode of Payment of Premium -

1. Payment at the branch office -

This is one of the most popular and easiest methods of payment of premium. In
this method, the policyholder can directly pay LIC premium amount through cash or
cheque

2. Payment through banks or agent -

Another option payment of premium available which is payment through banks or

agent, for smooth functioning some insurance companies have tie-up with specific
Bank where a policyholder can pay the premium.

3. Payment through the website -

online payment is one of the best and easiest way to payment of insurance
premium. In modern days payment as online through the insurance companies website
is one of the popular method of premium payment. almost all Insurance companies
have their own websites and offer their customers online payment premium service.
A policyholder can pay his premium amount easily by internet banking account or by
credit card.

4. Payment of insurance premium through the electronic clearing system -

It is an automated method, it is very easy to use and one of the most common and
isolated for premium payment which debits premium from specified bank account of
the insured to the insurer's specified account on the due date of the payment of
premium.

5. Billdesk -

Billdesk is an online method of insurance premium payment. It is very easy and

simple to use. For using this facility one has to register with bill desk and choose its
biller insurance company.

6. Credit card standing instruction -

In modern days credit card/ debit card is another mode of insurance

premium payment. Enable the auto-debit of the premium from the credit card on the
due date.

7. Easy bill outlet -

Using this system the insured can pay his insurance premium at any specific
designated outlet for the premium collection called 'easy bill outlet'.

8. Dropbox -

dropbox is the box specially designed by the insurance company for the
convenience of its customers. Dropbox is a system by which the customer can drop
his cheque of amount of his insurance premium at any dropbox of his Insurance
Company