Insurance Premium – Definition & Meaning

Insurance Premium

The amount of insurance premium that is paid out by the policyholder to the insurance company depends on a variety of factors.

As a process, insurance companies examine the type of coverage, the likelihood of a claim being made, the area where the policyholder lives,his employment, his habits (smoking for instance), his medical condition (diabetes, heart ailments) among other factors.

Insurance companies employ actuaries for the purpose of determining, for example, the likelihood of a claim being for a heart attack or cancer or another critical illness by individuals across various age groups and lifestyles.

The greater the risk associated with an event / claim,the more expensive the insurance premium will be.

Insurance companies offer policyholders a number of options when it comes to paying insurance premium.

Policyholderscan generally pay the insurance premium in installments, for example monthly or semi-annual payments, or they can even pay the entire amount upfront before coverage starts.

In case of non-life insurance, like auto insurance for instance, the annual insurance may be reduced following a no-claim year. Conversely, the premium can rise following a claim year.

Curated from Insurance Premium – Definition & Meaning

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