Deferred Premium


Definition - What does Deferred Premium mean?

A deferred premium is a payment for a policy that is not yet due. This will be paid on either a monthly, quarterly, or semi-annual basis. A deferred premium serves as a payment scheme for policyholders who cannot afford to pay their premium on an annual basis.

Insuranceopedia explains Deferred Premium

Payment for premium is flexible; a person can choose the frequency in which they will pay the premium within a year. If their budget allows, they can pay annually. This has the advantage of paying saving them some of the processing costs, since it only has to take place once. But if a large annual payment is too onerous, they can instead opt to make their premium payments in semi-annual, quarterly, or monthly installments. In those cases, the insurer simply divides the premium evenly across the year and charges the policyholder accordingly.

Monthly premium payments are a common option; however, they can be the most expensive if the charge for processing 12 payments is taken into account.

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