What is an insurance premium?
An insurance premium is an amount you pay for insurance coverage each month. All types of insurance require premium payments, such as auto, home, life, and medical. Failure to pay your premium can result in the cancellation of coverage. Many insurers offer several tiers of coverage with increased premiums matched with coverage for additional services or reduced out-of-pocket costs.
For health insurance, the premium can either be paid by the insured individual or, in the case of employer-based coverage, withdrawn from the employee's paycheck. With employer-based health insurance, a portion of the employee's premium is usually paid for by the employer. In select cases, the employer may pay the employee's entire premium, as well as a percentage of the premium for the employee’s spouse or children.
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When do I need to be aware of insurance premiums?
Insurance premiums grant you coverage. There are other important things to know about insurance premiums:
- Insurers may permit premiums to be paid in monthly or semi-annual installments.
- Some insurers may require upfront payment of premium in full before coverage starts.
- Additional charges may be payable to the insurer on top of premium, including taxes and service fees.
- Insurance premiums may increase after a policy period ends, based upon:
- claims made during the previous period
- an increase in the risk associated with offering a particular type of insurance -or-
- an increase in the cost of providing coverage