What is the definition of an insurance premium?

An insurance premium is defined as the amount paid for an insurance policy, typically on a monthly, quarterly, or annual basis. This payment is what keeps the insurance coverage active and allows the policyholder to receive benefits under the terms of the policy. Premiums are determined based on various factors including the type of coverage, risk assessment of the insured, and other underwriting criteria set by the insurance provider.

Understanding the definition of a premium is crucial because it directly impacts the affordability of insurance and the coverage options available to individuals and businesses. The premium payment ensures that the insured party is financially protected against specific risks as outlined in the insurance policy.