An estimated premium is a fee for insurance coverage or tax payments that may later be adjusted. Changes can be required due to specifics of a case, changes in policy, or other issues that may arise. When people make payments on an estimated premium, they are advised that it may change, and can receive information about when the final premium will be due so they have time to prepare. If they end up needing to pay less, a refund can be sent, and if there is a balance due, they will receive a statement with information on how to pay.
Insurance agents may offer an estimated premium when a client signs up for a new policy, based on available information. A customer insuring a car, for example, can offer specifics about the vehicle and the driver’s history to allow the agent to quickly determine the amount of the premium. This estimate may be adjusted later in light of new information, such as the fact that the car is parked in a location with higher or lower rates on a regular basis, or if the client wants to add a service after the policy has been written.
Estimated premiums can help people determine how much a policy is likely to cost before they commit. When doing price comparisons for insurance, pensions, and other products that come with a premium, clients can request a quote and will receive an estimated premium. This amount is subject to change pending the final release of the policy, although it may not change substantially. Any adjustments can be explained so the client understands the differences.
In some regions, tax payments are also referred to as premiums. Taxpayers send in an estimated premium to stay current with quarterly tax requirements. When they file their final tax declarations, the premiums are applied to the balance due. They may owe more money, requiring an additional payment, or could be entitled to refunds on the basis of their final tax information. Sending in estimated amounts over the course of the year may be required for businesses and self-employed people, while employers send in payments on behalf of their personnel after collecting deductions from paychecks.
If there are questions about the amount of an estimated premium, an accountant or insurance agent may be able to provide more information. Payment plans may be available for people who cannot afford the up front cost. A convenience fee is usually charged for this service, either in the form of a percentage of the total, or a flat fee.
