What is an Initial Premium?
The initial premium is the first payment an individual makes on any insurance policy. The policy terms dictate the amount of the initial premium. Generally, that payment needs to be made in order for coverage to go into effect.
The initial premium and policy coverage
When you apply for life insurance and get approved, your policy comes with a date of issue. Don’t assume that means the policy offers you coverage from that date on, though. It doesn’t.
Instead, life insurance doesn’t start protecting the life of an insured until the effective date. Generally, that coincides with the date of the initial premium. That payment activates the insurance contract. In other words, the insurer won’t start protecting you until they’ve received some money from you.
If you want to activate your life insurance coverage as soon as possible, don’t delay in getting your initial premium into your life insurance provider.
Initial premium amounts
The money you’re required to pay for your initial premium varies depending on your policy terms. Generally, the amount of your initial premium is the same amount you’ll pay each time a premium is due. If you chose to pay your premium annually, for example, the amount you pay in that first year will most likely be the same amount you’ll pay in each successive year.
That said, policy terms vary. If you choose single-premium life insurance, for example, your initial premium will be the full amount you need to pay for your coverage. Or if you chose universal life insurance, you’ll have flexibility in the amount you choose to pay after your initial premium.
Ultimately, you should refer to your insurance policy to ensure you have clarity around your initial premium amount, along with the amount of all future premiums.