Premium

Insurance rate is a factor used to determine the amount, called the premium, to be charged for a certain amount of insurance coverage. Insurance premiums need to cover both the expected cost of losses, plus the cost of issuing and administering the policy, adjusting losses, and supplying the capital needed to reasonably assure that the insurer will be able to pay claims. For small losses these latter costs may be several times the size of the expected cost of losses. There is little point in paying such costs unless the protection offered has real value to a buyer.

Insurance

Promise of reimbursement in the case of loss; paid to people or companies so concerned about hazards that they have made prepayments to an insurance company.