What is premium payment mode rebate in insurance policies?

In life insurance policies, especially in endowment and money back plans; insurance companies provide mode rebate on insurance premium to policy holders. This rebate is not claimed separately; rather it is subtracted from the final premium to be paid.

For example, LIC provides premium payment mode rebate of 2% on yearly & 1% on half yearly, and 0% on Quarterly & monthly premium payment to its policy holders.

This rebate is available on various LIC's plans like Jeevan Anand, Jeevan Labh, Endowment Plan, Jeevan Lakshya Plans etc.

To put it simply, for premium calculation, insurance companies fix monthly premium for an individual according to his age and policy term for a particular sum assured. Following table indicates monthly premiums of Jeevan Anand policy for 100000 Sum assured.

Age (In years) Term 21 Years Term 25 years Term 30 year
20 451.3 369.2 298.8
21 452.9 370.8 300.0
22 455.0 372.5 301.7
23 456.7 374.2 302.9

In the above table, monthly premium for a person aged 22 and term period 30 is Rs 300. If a policy holder wants to pay premium by opting for monthly mode, then he has to pay 300 per month. But if he chooses to pay on yearly basis, then yearly premium comes out to be 300x12=3600 and since he has opted for yearly mode, he will get 2% rebate on 3600 which comes out to be 72. The final premium for yearly mode will be 3528 (3600-72). Similarly, following table provides the rebate amount for other modes.

Premium calculation details for Age 22, Term 30 and sum assured:100000 @ Rs. 300 Per month.
Mode Premium Without  Rebate Rebate Rate Rebate Amount Final Premium to be Paid
Yearly3600 2% 72 3528
Half Yearly1800 1% 18 1782
Quarterly900 0% 0 900
Monthly3000%0300

So, it can be understood that if the amount is paid in advance, it would accumulate some interest and the same would be discounted to policy holder in the form of a rebate.

Frequently Asked Questions

Q: Do I have to claim this rebate separately?

A: No.

Q: What if some one changes premium mode in future?

A: New premium to be paid will be calculated afresh with applicable rebate rate.

Comments & Reviews (5)

Wrote :

17-12-2018 23:27:52

In jeevan lakshya plan there is an instruction like when we have sum assured amount more than 5 lakh will get 3% rebate amount. So what basis will i get it.

Wrote :

18-12-2018 09:18:30

Sir, you won?t get it separately, your final premium will be after deducting applicable rebate. It is automatic, you don?t need to do anything to claim it.

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Wrote :

15-12-2018 23:11:15

Thanks for your information. One more clarification for yearly basis premium if the sum assured value is more than 5lakh will i get 3% of rebate every year.?

Wrote :

15-12-2018 23:21:07

As per your sum assured, term, age and premium mode, premium amount is calculated by considering all rebates, your don't have to do anything in this regard such claiming rebate or something. You won't get 3% percent every year, rather your premium will be less.

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Wrote :

15-12-2018 16:23:47

Want to know about the rebate calculation for an ex my sum assured is 4lakh and policy term is 20 years. I will go for an year basis to pay premium is 20000. As you mentioned in policy instructions there is 2℅ of rebate yearly basis.so I will pay first year is 19600. What will be second year of premium will pay 19600 or 20000??

Wrote :

15-12-2018 18:30:34

It will be 196000 and it will same during entire policy term if mode is not changed in future.

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Wrote :

03-09-2018 17:59:42

What is the Rate of Interest for Jeevan Akshay 6 for the year 2018.

Wrote :

06-09-2018 15:15:38

It is not x % percentage of interest rate. The interest or annuity is dependent on pension option and age at the time of purchase. Please use Jeevan Akshay Pension Calculator to calculate it for yourself.

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Wrote :

31-08-2018 17:39:57

This scheme is specially deigned for Sr.Citizen Good scheme. But GST is applicable for 18% is too high. But PM's atal Pension scheme is not attract GST and ROI is 8%. but taxable. We the Sr.Citizen need exemption for this Jeevan Akshay 6 scheme. Kindly take up the matter to high authority and do some favour for Jeevan Akhsay 6

Wrote :

31-08-2018 19:38:37

On pension plan like Jeevan Akshay 6, the GST rate is 1.8% not 18%.

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