What Is Excess Premium In Life Insurance?
- Rikin Shah | Licensed Life & Health Insurance Agent
- Fact-Checked (see our Editorial Guidelines)
- Updated: May 15, 2023
Excess premium in life insurance refers to the amount paid for coverage beyond the basic policy limits. It is commonly found in casualty reinsurance contracts and provides additional coverage to ensure that claims that would otherwise not be reimbursed due to inadequate limits on the original primary policy will be paid out. Premiums are calculated based on the amount of coverage desired, and excess coverage limits are issued in tranches with a pre-determined factor assigned to each level. This type of premium is most commonly found in excess of loss reinsurance contracts, which protect the original ceding company from risks that have the potential to be severe and possibly place it into financial distress.
What is excess premium in life insurance?
Excess premium in life insurance refers to the amount paid for coverage beyond the basic policy limits. It is typically found in reinsurance contracts and provides additional coverage to ensure that claims that would otherwise not be reimbursed due to inadequate limits on the original policy will be paid out. Premiums are calculated based on the amount of coverage desired, and excess coverage limits are issued in tranches with a pre-determined factor assigned to each level.
How is excess premium calculated?
Excess premium is typically calculated based on the amount of coverage desired beyond the basic liability limits in your insurance policy. The excess coverage limits are issued in tranches with a pre-determined factor assigned to each level. The premium for excess limits coverage is then determined based on the level of coverage desired. Is there anything else I can help you with?
Why do some life insurance policies require excess premium payments?
Excess premium payments are typically required in casualty reinsurance contracts to provide additional coverage beyond the basic liability limits of the primary policy. This ensures that claims that would otherwise not be reimbursed due to inadequate limits on the original policy will be paid out. In the case of life insurance policies, excess premium payments may not be required, but some policies may have higher premiums for additional coverage or riders that provide extra benefits. It’s important to carefully review your policy and discuss any questions or concerns with your insurance agent.
What happens if I don't pay the excess premium?
If you don’t pay the excess premium, you may not have the additional coverage that you desire beyond the basic liability limits. This means that if a claim exceeds the limits of your primary policy, you may be responsible for paying the remaining amount out of pocket. It’s important to make sure you understand the terms of your policy and the consequences of not paying the excess premium.
Can I negotiate the excess premium with my life insurance provider?
No, excess premium is typically non-negotiable as it is a pre-determined factor assigned to each level of coverage. However, we can work with you to find a policy that fits your budget and provides the coverage you need. Would you like me to go over some options with you?
Is excess premium tax deductible?
Excess premium is not tax deductible for individuals. However, it may be deductible for businesses as a business expense. It’s always best to consult with a tax professional for specific advice on your situation. Is there anything else I can help you with?
Can excess premium payments be refunded?
Excess premium payments are typically non-refundable, as they are paid for additional coverage beyond the basic liability limits. However, it is always best to check with your specific insurance provider to confirm their policies on refunds.
Is there a limit to how much excess premium I can be charged?
Yes, there is typically a limit to how much excess premium you can be charged. The amount of excess premium is based on the amount of coverage desired beyond the basic liability limits in your insurance policy agreement. The excess coverage limits are issued in tranches with a pre-determined factor assigned to each level. The premium for excess limits is calculated based on the amount of coverage desired. However, the amount of excess premium you can be charged will depend on the terms of your specific policy agreement.
Do all life insurance policies have excess premium requirements?
No, excess premium requirements are typically found in casualty reinsurance contracts and are not a standard feature of life insurance policies. However, some life insurance policies may offer optional riders or add-ons that provide additional coverage beyond the basic policy limits, which may come with an additional premium cost. It’s important to review your policy carefully and speak with your agent to understand any additional costs or coverage options.
How can I avoid having to pay excess premium in my life insurance policy?
To avoid excess premium in your life insurance policy, you can opt for a policy with lower coverage limits that meet your needs. You can also consider a term life insurance policy, which typically has lower premiums than permanent life insurance policies. Additionally, maintaining a healthy lifestyle and avoiding high-risk activities can help reduce your premiums. It’s important to discuss your options with your insurance agent to find the best policy for your needs and budget.