Final answer:
A premium is a necessary payment by a policyholder to an insurance company to maintain coverage.
Explanation:
Premium is a payment made by a policyholder to an insurance company to purchase coverage. This payment is essential for maintaining the insurance contract. Without the premium, the insurance coverage may not be valid or active.
Policyholders need to pay the premium regularly to ensure that they are protected from financial losses covered by the policy. It is a crucial element of the insurance contract that signifies the financial commitment of the insured.
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