A premium is a price or amount the policyholders have to pay for a contract of insurance to the insurance company. It is the price paid for protection from an uncertain loss, hazard, or harm. It can be paid monthly, quarterly, or annually according to their plan, in return for the coverage the policyholders have taken from the insurance company.
The word “premium” is derived from the Latin word “praemium”, which means “reward” or “prize.”
Insurance premiums are mainly determined by the likelihood of the insured things having a loss or a setback out of their control and are based on specific types of risk that are predictive of loss. Things that have lower risks also have a good chance of lower premiums.
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