Insurance
What is Premium?
Definition
A premium is the recurring payment — monthly, quarterly or annual — the policyholder makes to keep an insurance policy active. Miss enough premiums and the insurer can lapse coverage, ending all claim rights.
Real-World Example
A homeowner pays a $1,860 annual premium for a $400,000 dwelling policy. Skipping payments triggers a 30-day grace period; after that the policy lapses and any subsequent loss is uninsured.
Why It Matters
Premium is the visible cost; the deductible and exclusions are the hidden ones. A cheaper premium often means a higher deductible or narrower coverage — trade-offs that only show up at claim time.
Frequently Asked Questions
What happens if I stop paying premiums?
The insurer sends a grace-period notice; if unpaid, the policy lapses and prior claim history follows you into any new policy.