What is an insurance premium?

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Study for the General Financial Literacy State Test. Prepare with flashcards and multiple-choice questions, each with hints and explanations. Enhance your financial expertise for success!

Multiple Choice

What is an insurance premium?

Explanation:
An insurance premium is the payment you make to obtain and keep your insurance coverage. It’s the price you pay to the insurer in exchange for the protection the policy provides, and it’s typically paid on a schedule such as monthly, quarterly, or annually. Keeping up with the premium keeps the policy active; if payments stop, the coverage can lapse or be canceled. To place it in context, the amount you pay when you file a claim is called a deductible (or copayment in some plans), which is paid out of pocket when you use benefits. The grace period is the extra time allowed to pay the premium after its due date. A beneficiary is the person named to receive proceeds from the policy.

An insurance premium is the payment you make to obtain and keep your insurance coverage. It’s the price you pay to the insurer in exchange for the protection the policy provides, and it’s typically paid on a schedule such as monthly, quarterly, or annually. Keeping up with the premium keeps the policy active; if payments stop, the coverage can lapse or be canceled.

To place it in context, the amount you pay when you file a claim is called a deductible (or copayment in some plans), which is paid out of pocket when you use benefits. The grace period is the extra time allowed to pay the premium after its due date. A beneficiary is the person named to receive proceeds from the policy.

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