What is a premium in the context of life insurance?

What is a premium in the context of life insurance?

• A. A one-time payment at the beginning of the policy
• B. The guaranteed payout amount to the beneficiaries
• C. The amount paid by the policyholder to maintain coverage
• D. The cash value accumulated in the policy

Answer: (C)

In the context of life insurance, a premium refers to the amount paid by the policyholder to maintain coverage. This payment is typically made on a regular basis, such as monthly, quarterly, or annually, depending on the terms of the policy. The premium is crucial because it is the financial commitment the policyholder makes to ensure that the insurance coverage remains in effect, protecting the beneficiaries in the event of the insured's death. Understanding the premium is essential, as it reflects the policyholder's investment in their life insurance policy and impacts the overall cost and types of benefits that can be received. If premiums are not paid, the policy may lapse, resulting in a loss of coverage.

In the context of life insurance, a premium refers to the amount paid by the policyholder to maintain coverage. This payment is typically made on a regular basis, such as monthly, quarterly, or annually, depending on the terms of the policy. The premium is crucial because it is the financial commitment the policyholder makes to ensure that the insurance coverage remains in effect, protecting the beneficiaries in the event of the insured's death.

Understanding the premium is essential, as it reflects the policyholder's investment in their life insurance policy and impacts the overall cost and types of benefits that can be received. If premiums are not paid, the policy may lapse, resulting in a loss of coverage.