Insurance
Premium (Insurance)
An insurance premium is the amount paid by the policyholder to the insurance company for coverage, typically paid monthly, quarterly, or annually.
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Exam Tip
Premium factors: age, health, coverage amount, deductible. Higher deductible = lower premium.
What is an Insurance Premium?
A premium is the price you pay for insurance coverage. It's the cost of transferring risk from yourself to the insurance company.
Factors Affecting Premiums
| Factor | Impact |
|---|---|
| Age | Older = higher premiums (life/health) |
| Health Status | Pre-existing conditions increase cost |
| Coverage Amount | More coverage = higher premium |
| Deductible | Higher deductible = lower premium |
| Risk Classification | Higher risk = higher premium |
| Location | Some areas have higher rates |
Premium Payment Modes
| Mode | Frequency | Typical Cost |
|---|---|---|
| Annual | Once per year | Lowest total cost |
| Semi-annual | Twice per year | Slightly higher |
| Quarterly | Four times per year | Higher |
| Monthly | Twelve times per year | Highest total cost |
Grace Period
Most policies have a grace period (typically 30-31 days) to pay overdue premiums without losing coverage.
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Related Terms
Deductible (Health Insurance)
InsuranceA deductible is the amount a policyholder must pay out-of-pocket before the insurance company begins to pay for covered expenses.
Beneficiary
InsuranceA beneficiary is a person or entity designated to receive the death benefit or proceeds from an insurance policy or retirement account.