An insurance premium is a payment made to an insurer to keep an insurance policy active.
Premiums are commonly paid monthly, quarterly, or annually. The amount depends on factors such as the type of coverage, the insured risk, the policy limit, the deductible, and information used in underwriting. A car insurer, for example, may consider the vehicle, driver history, location, and expected use.
A premium is different from a deductible. The premium buys ongoing coverage, while the deductible is the amount the policyholder generally pays toward a covered loss before the insurer contributes. A policy limit is different again: it is the maximum amount the insurer will pay for a covered claim.
The word premium is used across life, health, property, and liability insurance. Missing required premium payments can cause a policy to lapse, although many policies provide a grace period. Insurance markets historically developed from marine-risk practices, including the coffeehouse associated with Lloyd's of London in the late 17th century.