What does Premium refer to in an insurance contract?

What does Premium refer to in an insurance contract?

• A. The amount paid for a contract of insurance.
• B. The maximum amount paid per claim.
• C. The deductible that must be met before benefits start.
• D. The time allowed to file a claim after a loss.

Answer: (A)

In insurance, premium is the price you pay to obtain and maintain the coverage. It’s the cost of keeping the contract active, paid on a schedule you choose (monthly, quarterly, yearly). The premium is not the amount the insurer will pay you for a claim, nor is it the amount you must pay out of pocket before benefits start (that’s the deductible), and it’s not the time limit for filing a claim. Paying the premium keeps the policy in force so that when a covered loss occurs, the insurer honors the benefits up to the policy’s limits.

In insurance, premium is the price you pay to obtain and maintain the coverage. It’s the cost of keeping the contract active, paid on a schedule you choose (monthly, quarterly, yearly). The premium is not the amount the insurer will pay you for a claim, nor is it the amount you must pay out of pocket before benefits start (that’s the deductible), and it’s not the time limit for filing a claim. Paying the premium keeps the policy in force so that when a covered loss occurs, the insurer honors the benefits up to the policy’s limits.