Definition of Insurance Premium
The insurance premium is the periodic instalment or payment associated with the insurance contract to cover the amount of loss incurred as a result of happening and not happening of an uncertain event.
People or businesses purchase insurance policies to minimize or to eliminate the risks faced by them. For example, most business properties are insured against the risk of fire. The insurance companies approach them and offer them a certain amount to cover the loss caused by fire.
The amount of insurance premium is pre-determined at the time of entering into an insurance contract when most of the clauses are included or excluded. The insurance premiums can be monthly, semi-annually or yearly depending on the nature of the insurance policy.