What is an insurance premium?

A. A low-risk investment
B. A credit check on policyholders
C. An evaluation of an individual's risk
D. A charge on policyholders to cover risk



Answer :

Final answer:

An insurance premium is the fee paid by a policyholder to an insurance company for coverage, helping spread the risk of losses. Premiums are calculated based on the likelihood of events and are vital for financial stability in insurance. Understanding insurance premiums is essential for both policyholders and insurance companies.


Explanation:

Insurance premium is the amount a policyholder pays to an insurance company to purchase coverage. It is a fee that helps spread the risk of potential losses across a larger population. Premiums are calculated based on the likelihood of certain events occurring among a group of people.

In insurance, premiums are essential for the company's financial stability. The premium amount is determined by factors like the type of coverage, risk exposure, and the insurer's ability to cover potential losses.

Overall, an insurance premium is a crucial component of the insurance system, providing financial protection to individuals and allowing insurance companies to manage risk effectively.


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