What is Adjustable Premium
An adjustable premium is a type of insurance policy with a monthly payment that can fluctuate over time.
BREAKING DOWN Adjustable Premium
An adjustable premium can also be known as a variable premium in the insurance market. Things like higher than expected maintenance costs on the policy may cause the rates to increase. On the other hand, increased investment returns from the insurance company could lessen the monthly outlay. Most of the time consumers seek these types of policies out when they are looking for flexibility in their monthly payment or when they expect their lifestyle situation to change over time and would like to have their payments change with it.
The premium is the annual or monthly amount the insured pays into their insurance policy. The terms of the policy are determined ahead of time, so the variable premium will not be a surprise to the insured. The margin for change should be agreed upon at the signing of the enforcement. These types of adjustable premium policies are most commonly found on life insurance policies. The opposite of an adjustable premium insurance policy is a fixed premium insurance policy. Fixed premium policies are the most common type of insurance policy.
What is Life Insurance
Life insurance is a type of insurance policy that pays out upon the insurer's death, or after a certain amount of time has passed. There are different types of life insurance policies, such as a whole life policy and a term policy. Each policy has different requirements individuals must meet to qualify for insurance. Some policies require the applicant complete a physical with a licensed health care professional and receive a complete panel of blood work and drug tests. Other policies require less verification, but may come at a higher cost. Monthly premiums can rage greatly on life insurance policies, as can their benefit amounts. People who are older or are in poorer health may need to pay a higher monthly premium or take out a policy with a lower benefit amount.
Conversely, younger applicants in generally good health may experience lower premiums with a larger payout. Because younger applicants are expected to have a longer life span, they will have a longer amount of time to pay into the policy before the insurer has to make a death benefit payout.
Some people will also take out life insurance policies such as whole life policies to build up tax-free assets quickly. These policies carry a cash value that can be borrowed against and sold.