Insurance premiums are paid for policies that cover healthcare, auto, home, and life insurance. Once earned, the premium is income for the insurance company. It also represents a liability, as the insurer must provide coverage for claims being made against the policy.
How do insurance premiums work?
When you sign up for an insurance policy, your insurer will charge you a premium. This is the amount you pay for the policy. Policyholders may choose from several options for paying their insurance premiums.
What is the difference between insurance rate and insurance premium?
An insurance rate is the dollar amount an insurer charges for each unit of protection provided to each type of policyholder. The rate charged per unit depends on the specific risk characteristics for each category of policyholders. The insurance premium is the actual amount the policyholder pays to the insurance company in exchange for coverage.
