Definition of Adjustable Premium

An adjustable premium can be referred to as an insurance premium that can be adjusted based on the initial terms or agreement.

Brief Explanation of Adjustable Premium

The policyholder can increase or decrease the amount of premium as per the changed requirements over a period of time. Adjustable premium is often called a variable premium because it allows for alterations including the change in the cost of maintaining the contracts. An adjustable premium also means that the total amount the policyholders were entitled to pay initially can be expected to change owing to the circumstances. This feature of variable premium amount is similar to the structure of the adjustable rate mortgage. The change in the amount that the policyholders are liable to pay depends upon the costs incurred by the insurance company. This means that if a certain policy costs more amount to the insurance policy than which was originally expected or calculated then in that case the policyholders will have to pay increased adjustment premiums. Similarly in case a certain investment yields higher returns than the insurance company had estimate than consequently the amount of the premium that the policyholders were originally required to pay would eventually decrease.