Definition - What does Insurance Premium mean?
An insurance premium pertains to the money the insured has to pay the insurer for the latter to provide coverage for the former. The payment may be in full or in installments. The payment usually starts after the insured and the insurer agree with the terms of the insurance policy. The insured can either be a person or a group.
Insuranceopedia explains Insurance Premium
High-income groups or individuals often buy higher priced policies. Conversely because of their lower purchasing capability, low-income groups or individuals can only pay for policies that have lower premiums.
The possibility that a claim can be gotten earlier affects the price of the premium. A young person may pay a lower premium for a health or life insurance compared to someone in his or her middle age. The young person is less likely to encounter a health problem compared to the middle-aged one and thus, it is less likely for the insurance company to be financially liable--earlier. Hence, the lower price.
It is for the same reason that renewing a policy might mean increasing the premium. For instance, if the policy period of the insured ends and he or she reaches an age that will make him or her a health risk or he or she has acquired a lifestyle that makes him or her a health risk, the insurer might decide to increase the price of the premium.
Certain policies, because of the eventual cost of the coverage, have more expensive premiums than others. The property insurance premium of a ten-story building in a big city is likely to be more expensive compared to a two-bedroom house in the suburbs.