What is a premium and how does it work?
The premium compensates the insurer for bearing the risk of a payout should an event occur that triggers coverage. The most common types of coverage are auto, health, and homeowners insurance.
What is a car insurance premium?
The car insurance premium is the amount you pay to the insurance company to purchase or renew your car’s insurance policy. You pay the premium and receive a policy document. That is the nature of the transaction in the car insurance industry. The policy document acts like a receipt and a promise, which is bound by the Policy Wordings.
Why do options have a premium?
Option Premium. The premium that is paid is its intrinsic value plus its time value; an option with a longer maturity always costs more than the same structure with a shorter maturity. The volatility of the market and how close the strike price is to the then-current market price also affect the premium.