Definition of Premium in Insurance

An amount of money has to be paid regularly to the insurance company by an insurance holder for insured life risk. Insurance premium means annual payment made by a person to an insurance company.

Generally premium means the extra payment to buy a share. This word mostly use in the share market where shareholder can sell or buy a share. If the shareholder buy a share with the extra money and face value of it, then that’s the extra money is called the premium.

But in the insurance point of view of premium refers the different meaning. Premium means that type of money that an insurance company takes from the insurance holder by promising that he must fulfill the losses if occurred in the insured product. If this premium is paid more than one than its called installment. For the contract of the life insurance, insurance holder has to pay his installment to the insurer in different period of time. In this type of proposed insurance, insurance holder must pay money for insured his life by the installment. This installment is called the premium of the life insurance. Actually premium is just the purchasing price of the insurance.

P.H.Collin has defined premium as "Insurance premium means annual payment made by a person on a company to an insurance company."

Oxford Advanced Learners Dictionary quoted premium as "Premium means an amount or money to be paid regularly for an insurance policy."

Premium is that money for which insurer provides financial security against risk in behalf of the insurance policy holder. Premium can be paid in one time or several times.

To know more about premium in insurance or insurance premium, check out: features of premium in insurance.