What does the term 'premium' in insurance refer to?

The term 'premium' in insurance specifically refers to the amount the policyholder pays to the insurance company to maintain their coverage. This payment can be made on a regular schedule, such as monthly, quarterly, or annually, and is essential for keeping the insurance policy active. Premiums are determined based on various factors, including the type of insurance, the level of coverage, the insured’s age, health status, and other underwriting criteria.

Understanding premiums is fundamental for anyone entering the insurance field because they represent the essential cost of obtaining and maintaining insurance coverage. Without timely premium payments, the policy could lapse, leading to a loss of coverage and potential benefits. The other terms mentioned, such as benefits payable on a claim, sum assured upon death, and cash value of a policy, pertain to components and features of insurance policies but do not define what a premium actually is.