What does Annual Premium mean?

Answer 1

This is the amount paid the policyholder on an annual basis to cover the cost of the insurance policy being purchased. In effect, it is the primary cost to the policyholder of transferring the risk to the insurer.

Important to keep in mind, though, is that this will not be the only cost incurred to maintain the insurance. Depending upon the type of coverage involved, there may be deductibles and copayments, which are forms of cost-sharing between the insured and the insurer.

A deductible is the amount that the insured must pay toward a covered claim before the insurer's obligation to pay is triggered. For example, if one maintains a $250 auto collision deductible, the insured is responsible for the first $250 in repair costs for a covered claim.

A copayment is a type of cost sharing frequently found in health insurance policies, although deductibles also exist there. A copayment is the percentage of a covered claim for which the insured is responsible once the deductlble has been met.