“Premiums paid within 20 days before a policy anniversary are assumed to be paid in the following year”
UPDATED: Oct 17, 2017
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What does this footnote will affect? Be as specific as possible
Asked October 17, 2017
The policy anniversary refers to the date the policy was issued. It means that after this day, the insurance policy begins a new year. Therefore, if a policyholder pays one to twenty days before the policy anniversary, the money will be considered as payment made in the next year. Policy anniversaries come with an increased cost of insurance. This term always confuses policyholders, and some do not understand why their premiums have to increase annually.
According to this particular policy term, paying within twenty days of policy anniversary dictates additional amount. Every new year the premium amount increases because the policyholder also grows older. In other words, the risk of the insured individual also increases. The insurance company puts this into consideration and hence, the premium ought to increase. The amount of increase is determined by the premium and other factors of the insurance policy.
It is advisable for policyholders to pay before twenty days. They will save money and will not have to pay the added cost for the next year. Insurance companies have different policies on the due date of premium payments. Some companies will have more flexible terms than others. Insurance customers are advised to understand carefully before committing to a policy. People need to choose insurance terms with easy terms for them.
Some people may decide to take up a fixed premium policy. Such people do so because they feel; eventually, insurance will become too expensive for them to afford in future. Individuals nearing their old ages are the ones mainly concerned with this issue. Such a policy will have limitations such as a fixed amount of compensation. It means a person with a fixed premium policy will receive lower benefits than another with increasing premiums. Every individual has the liberty to choose depending on his or her insurance needs.
Answered October 19, 2017 by larson82