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.