Personal Finance

What Is an Insurance Premium?

An insurance premium is the amount a policyholder pays, usually monthly or annually, to keep an insurance policy active. The insurer sets premiums based on the estimated risk and cost of claims, the amount of coverage, and the deductible chosen.

Premium vs. Deductible

The premium is the ongoing price of coverage; the deductible is what the policyholder pays out of pocket on a claim before insurance pays. A higher deductible usually means a lower premium.

Comparing Policies

Annual cost = premium × payments per year, plus expected out-of-pocket costs.

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🔗 Related Terms

Insurance Deductible Homeowners Insurance High-Deductible Health Plan (HDHP)

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Last updated: September 29, 2026. This definition is for general educational purposes only. It is not financial, investment, tax, legal, or medical advice, and it does not recommend any product or course of action. For decisions about your own situation, consult a qualified professional.