The insurance premium is a fundamental part of the decision to take out one insurance policy or another. A crucial element for future policyholders or insured persons. The insurance premium varies according to the company, the type of risk, the contract or the sum insured.
In this article we will delve into what an insurance premium is and all the questions it usually raises.
What is an insurance premium?
The premium is the price of insurance, i.e. the amount to be paid by the policyholder at the time of taking out the service. Among the most common types are the single premium and the periodic premium, for example, once a year (if it is annual).
With this amount, the insured is covered - by the company - in the event of a claim or similar. The conditions of the insurance premium are reflected in the policy itself.
How is an insurance premium calculated?
To carry out the calculation of an insurance premium, companies must assess risk. For example, when asking how a vehicle insurance premium is calculated, factors such as the driver's age or years of experience must be taken into account.
Thus, in order to know how much your insurance premium will cost you, it is necessary to bear in mind the following concepts:
Pure premium: This is the estimate of the insured risk. It is calculated through a theoretical probability of the loss and its economic cost. The technical interest attributed must also be added.
Inventory premium: This is the sum of the pure premium plus administrative and management fees.
Tariff premium: This consists of the inventory premium as well as other external management costs.
Final premium or total premium: In addition to the insurance premium, there are various additional amounts such as the Consortium, IPS, IPS, etc.
Types of insurance premiums
Depending on the type of insurance premium payments, we can distinguish 2 classes:
Single premium insurance: This is the least common type of insurance, as it is mainly used for fear insurance (insurance coverage for a renovation or construction). The entire insurance premium is paid in a single disbursement. Also in death insurance, it is used for quite old people.
Periodic premium: As the name suggests, this is a regular payment. For example, once a year, or half-yearly or quarterly...
Paying an insurance premium: how is it done?
Normally, it is carried out by means of a direct debit, This is the most effective and convenient method of payment for both parties.
The insurance payment can be made directly by the insured to the company or through an agent. It should be noted that any payment of an insurance premium must have a receipt to prove that the payment has been made and that you are covered for the next few months if something happens to you.
What happens if I stop paying the insurance premium?
In case of non-payment, the company can take legal action against the policyholder. A claim for payment is usually brought in court, known as a “monitorio”. This usually takes place within six months of non-payment. The insurance cover ceases, however, one month after the due date (as the company grants a “month of grace”).
What is the Insurance Premium Tax or IPS?
First of all, it should be noted that insurance premiums are not subject to VAT, unlike other services. However, they do have an Insurance Premium Tax or IPS, which is levied on insurance premiums. since this year increased from 6 to 8% following the new State Budget for 2021.
According to the Ministry of Finance, this is its definition:
How is the return of unearned insurance premiums carried out?
On the other hand, we cannot ignore this very important point, as it is a widespread issue among the population.
What is certain is that it all depends on the insurer itself. Most commonly, you have a period of 1-2 years to use the unearned premium for another insurance policy. For example, there are companies that keep the unearned insurance premium in a deposit, which is useful for a car insurance premium.
If your car is totaled, you have that unearned insurance premium available to deduct from your new vehicle policy.
Other insurers also refund the unearned premium. In any case, this must be reflected in the clauses of the insurance policy itself, so it is advisable to pay attention when signing.
It should be added that, according to the Directorate-General for Insurance and Pension Funds, If there is no specific clause on the return of the unearned insurance premium, the insurer has every right to keep this amount.
Is an insurance premium deductible for personal income tax purposes?
Not all, but some do count as expenses deductible for personal income tax purposes. For example, health insurance premiums do have a deduction for the self-employed, setting a maximum:
500 euros for the self-employed person or for each member of his or her family (spouse or cohabiting children under 25 years of age).
500 euros if the self-employed person or any of these family members has a disability.
Taking out a policy with an insurance broker only brings benefits to the policyholder. These advantages are not only economic, but also stand out for their human value:
The best rates on the market: One of the great benefits of hiring a life insurance or a household insurance with a brokerage is your price. At PIB Group Iberia we offer our clients the best prices, as we have additional discounts. Because, although insurance companies may offer these products for a lower cost on their website, they have the lowest guarantees, because they know that those who quote on their website are looking for the lowest possible price. In effect, once again: “cheap is expensive”.
Direct thread with insurance companies: Calling the insurance company can be a very impersonal situation. Having an insurance broker means dealing with your policy with professionals who know the other professionals. Consequently, actions such as refunding an insurance premium, resolving a claim, negotiating a renewal, are speeded up considerably.
A humane and quality service: We inform you about all the details, in order to give you an in-depth knowledge of the service you are contracting.
At PIB Group Iberia we try to ensure that our clients do not fall “into a pit” when taking out insurance, as sometimes happens when they do it on their own. By not knowing what some of the issues mean, there is a tendency to adjust the insurance when, in the event of a claim, this can be fatal.
We know that transparency is essential. Therefore, we will be happy to answer any questions you may have in the following areas PIB Group Iberia so that you can get the insurance with the necessary guarantees and the premium that best suits your budget.
