Insurance Premium: What Does It Mean?

An insurance premium is the amount of money an individual or business pays to an insurance company to maintain active coverage under an insurance policy. Premiums can be paid in various frequencies—monthly, quarterly, semi-annually, or annually—and the amount is determined by multiple factors, including the type and amount of coverage, the insured's risk profile, claims history, demographics, and other underwriting criteria. The premium represents the cost of transferring risk from the policyholder to the insurance company.