Premium - Glossary (2024)

FAQs

What does a premium mean in insurance? ›

An insurance premium is the amount you pay each month (or each year) to keep your insurance policy active. Your premium amount is determined by many factors, including risk, coverage amount and more – depending on the type of insurance you have. This does not apply to all types of life insurance.

Broadly speaking, a premium is a price paid for above and beyond some basic or intrinsic value. Relatedly, it is the price paid for protection from a loss, hazard, or harm (e.g., insurance or options contracts).

What's the difference between a premium and a rate? Premium – The amount you pay to an insurance company for an insurance policy. Rate – The cost of insurance per exposure unit ($1,000 of home coverage or one year of auto coverage).

This process is known as "signing down" or "closing", and the resulting premium is the "signed premium" whereas the premium before signing down is the "written premium". The final result is known as the 'market' for that risk.

premium noun [C] (EXTRA)

something extra given or an extra amount charged: You get a lipstick as a premium with the purchase of this makeup. Our customers are willing to pay a premium for a superior product. If you get something at a premium, you pay a high price for it, esp.

Your Annual Premium Statement shows who is insured and what benefits you are covered for under your group policy.

The term premium is defined as the compensation that investors require for bearing the risk that interest rates may change over the life of the bond.

1. a. : a reward or recompense for a particular act. b. : a sum over and above a regular price paid chiefly as an inducement or incentive.

An example of employer contribution is a company paying 80% of the premium, with employees covering the remaining 20%. In a 100% coverage scenario, the employer bears the entire premium cost.

The amount you pay for your health insurance every month. In addition to your premium, you usually have to pay other costs for your health care, including a deductible, copayments, and coinsurance. If you have a Marketplace health plan, you may be able to lower your costs with a premium tax credit.

What does "very premium" mean? ›

Something that's premium is much better than average — it's excellent, in fact. A premium seat at a rock concert is right up front, with a great view of the stage. When premium is a noun, it means the money you pay each month for your car insurance or a charge that's added on top of a standard payment.

Definition of Premium Payment Term

The premium payment term in insurance refers to the duration or period during which the policyholder is required to make premium payments for their insurance policy. It specifies the timeframe over which the premiums are to be paid to keep the policy in force and active.

Ultimate premium revenue for that policy/underwriting year equals total WP to-date, with the possible adjustment for written premium amounts expected in the future for that policy/underwriting year. (Examples of such future written premium transactions are late bookings, policy cancellations and endorsem*nts.

Say, for example, you take out an automobile insurance policy and prepay for a six-month term. If you get into a car crash and total your vehicle in the second month of the policy, the insurance company keeps the premiums paid for the first two months. These are the company's earned premiums.

Assumed premiums are the revenue received for policy coverage that's provided due to a reinsurance agreement. Gross premiums written is the sum of direct premiums written and assumed premiums written prior to the effect of ceded reinsurance is taken into account.

Premium refers to a segment of a company's brands, products, or services that carry tangible or imaginary surplus value in the upper mid- to high price range.

What Is an Insurance Premium? An insurance premium is the amount of money an individual or business pays for an insurance policy. Insurance premiums are paid for policies that cover healthcare, auto, home, and life insurance. Once earned, the premium is income for the insurance company.

Monthly premium x 12 months: The amount you pay to your insurance company each month to have health insurance. Deductible: How much you have to spend for covered health services before your insurance company pays anything (except free preventive services)