Associate In Insurance (AINS) 101 Practice Test

What is a premium?

The insurer's profit The deductible amount the insured pays Payment made for insurance coverage The maximum claim limit

Correct Answer:

Payment made for insurance coverage

Explanation:

A premium is the payment the insured makes to obtain and maintain insurance coverage. It’s the price you pay to transfer the risk to the insurer, covering the cost of potential claims as well as the insurer’s administrative expenses and a profit margin. The premium is not the deductible (that’s the amount you pay out of pocket when a claim occurs before coverage kicks in) and it’s not the maximum amount the insurer will pay for a loss (that’s the policy limit). For example, you might pay an annual premium to keep auto coverage, while a separate deductible and a separate policy limit dictate how much you personally pay on a claim and the most the insurer will pay.

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