AMOUNT OF PREMIUM

What is Premium?

Premium is the money paid by the person buying insurance (called the insured) to the insurance company (called the insurer).

How is the Premium Calculated?

The amount of premium depends on several factors that affect the risk. Risk means how likely it is that the insured event will happen. Some factors that affect risk are:

• Type of insurance (like life insurance, health insurance, etc)
• Amount being insured (higher amount means higher risk)
• Age, gender, health conditions of person being insured (younger healthy people are lower risk)
• Location (some places may be higher risk than others)

Normally, premium is charged as a percentage of the total amount being insured.

For example, if the amount being insured is Tk. 481,620 and the premium rate is 0.5% of the insured amount, then we calculate like this:

• Insured amount is Tk. 481,620
• Premium rate is 0.5%
• To calculate 0.5% of Tk. 481,620 we divide it by 100 and multiply by 0.5
• So 0.5% of Tk. 481,620 is Tk. 481,620 / 100 * 0.5 = Tk. 2,408

So in this example, the premium amount is Tk. 2,408.

How is the Premium Paid?

• Premiums are usually paid in cash or by cheque, but other arrangements can be made if both parties agree.

Who Sets the Premium Rates in Bangladesh?

• In Bangladesh, the rates for premiums, also known as tariffs, are set by the Central Rating Committee. This committee is led by the Chairman of the Insurance Regulation and Development Authority, which operates under the Ministry of Finance.
• These tariffs are regularly updated.

EFFECT OF PAYMENT OF PREMIUM

When the person taking insurance (called the insured) pays the premium amount to the insurance company (called the insurer), it means they have agreed on a contract for insurance.

By accepting the payment, the insurer is agreeing to provide insurance cover to the insured. The insured then has the right to receive an insurance policy document from the insurer.

If the insurer accepts the payment of premium even though they know that the insured gave wrong information or did not disclose important details while applying for insurance, then the insurer cannot later say that the contract is not valid because of what the insured did wrong.

Similarly, if the insurer takes the premium knowing that the insured has broken some rule mentioned in the contract after it started (like increasing the risk), they still cannot cancel the contract.

PAYMENT OF PREMIUM TO WHOM

The premium can be paid to two places:

1. Directly to the insurance company.
2. To an agent who is authorized to work for the insurance company, if the insured had submitted the application through that agent.

RIGHT TO RECLAIM A RETURN OF PREMIUM

The right to get back some or all of the insurance premium you paid depends on whether the insured risk actually happened or not.

If the risk never happens, then you basically got no benefit from the insurance. So it’s only fair that you get your full premium back.

RIGHT TO RECLAIM FULL RETURN OF PREMIUM

There are a few situations where you can get your full premium back:

• Agreement Issues: If you and the insurance company never really agreed on the details of the insurance (no meeting of the minds)
• Illegal Policy: If the insurance itself was illegal or fraudulent
• No Insurable Interest: If you had no financial interest in what was insured
• Identification Issues: If the insured item cannot be clearly identified
• Ultra Vires: If selling that type of insurance was not allowed for that company
• Fraud or Bad Faith by Insurer: If the insurance company acted dishonestly
• Avoided Policy: If the insurance was cancelled because of an innocent mistake in the application

RIGHT TO RECLAIM PARTIAL RETURN OF PREMIUM

You may be able to get some of the premium back in other situations:

• Policy Terms: If the insurance policy says, you can get a partial refund
• Insurance Company Liquidation: If the insurance company goes out of business, you may get some money back for the unused time on the policy.

NO RIGHT TO A RETURN OF PREMIUM

1. Policy Conditions: Sometimes, the insurance policy has specific rules that say the premium won’t be returned if certain things happen. For example, if the insured made a false statement when buying the insurance, and the policy says that means no refund, then they won’t get their money back.
2. Insured’s Fault: If the reason the insurance can’t be used is because of something the insured did wrong, like lying or hiding the truth, then they can’t expect a refund.
3. No Mistake by the Insurance Company: If the insurance company did its part correctly, but something happens that’s not covered by the insurance (like a natural disaster that’s not included), you won’t get your money back.