Texas Property and Casualty License Practice Exam 2025 – All-in-One Guide to Exam Success!

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What does "premium" refer to in insurance?

The deductible amount of a policy

The amount paid for an insurance policy

In insurance, "premium" specifically refers to the amount paid for an insurance policy. This payment is typically made on a regular basis, such as monthly or annually, and is required for the policy to remain in force. The premium is determined by various factors, including the level of coverage, the risk profile of the insured party, and the underwriting guidelines of the insurance company.

Understanding this concept is crucial, as it affects not only the affordability of insurance for individuals and businesses but also the amount of coverage they can secure based on their budget. The other options address different aspects of an insurance contract, such as deductibles, claims compensation, and coverage values, but none directly represent the definition of a premium. The premium is essentially the cost of securing the protection that the policy offers.

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The compensation received after a claim

The total value of coverage provided

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