Premium

A premium is the payment made by a policyholder to an insurance company in exchange for life insurance coverage. Premiums can be paid monthly, quarterly, semi-annually, or annually — with most carriers offering a discount for annual payment. Premium amounts are determined by the insurer's actuarial assessment of risk based on the applicant's age, health, gender, lifestyle, family history, coverage amount, and policy type. For term policies, premiums fund pure insurance protection. For permanent policies, premiums fund both the death benefit and cash value accumulation. Failure to pay premiums within the grace period results in policy lapse.