Flat extra
There is a scientific reason behind the method of rating the case. This method depends on the type of risk that the extra premium is being charged for.
The flat extra and the multiplier are two methods used for calculating extra premium due to nonmedical factors. Flat extra is generally imposed on cases where the extra risk is due to occupation or residential factors and would remain constant the whole time a client is in the particular job or area.
Medical risks which generally increase with age are rated up by a the Extra Mortality Rating method. Under the flat extra method the standard premium for the policy is increased by a specified number of rupees per 1,000 of the sum assured for life insurance. This does not vary with age of the applicant or the type of plan. The underwriter may specify that the ‘flat extra’ be paid throughout the term of the plan or only for a short duration till the risk exists.
The flat extra method is widely used to cover risks associated with certain occupations and avocations. Multiplier method is used to rate up accident riders for occupation and avocation causes and is simply a multiple of the premium.
Flat Extra example A client is in a high risk occupation and has applied for a policy of Rs. 1 lakh. The premium he has to pay as per the premium table rate chart is Rs. 2,000. If the underwriter rates him 2 per mille (also written as 2 pm) He has to pay Rs. 200 more as shown in the calculation below. Rs. 2 per 1,000 so for 100,000 = Rs. 200 extra premium 200 added to original standard premium 2,000 = 2,200 rated premium Multiplier example 2x = 2 multiplied by the premium If the accident rider premium is 150 and the underwriter has rated up the rider 3x, then 150 × 3 = 450 will be the premium for the rider.
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