Premium calculation and payment is usually matched to the loan product concerned. This assists in administration where the two are sold together, although it is not a requirement.
The premium is made up of two factors.
Premium rate
This consists of calculations which take into account,
- The risk element and likely frequency of claims, and
- The length of period the arrangement will be in force.
Sum Insured
This is influenced by several factors such as,
- The amount of loan,
- The regular loan repayment,
- The outstanding balance on the account.