Basic Premium

What Does Basic Premium Mean?

A basic premium refers to the portion of the standard premium that is allocated to cover agent commissions and administrative costs.

Insuranceopedia Explains Basic Premium

Insurance companies calculate premiums to cover underwriting costs, agent commissions, future claims, and other expenses or potential losses that may arise from issuing an insurance policy. The basic premium is just one piece of how business insurance premiums are calculated, and its size depends largely on how an insurer pays its agents and handles its operating costs. The insurer adds the basic premium to the pure premium to determine the standard premium.