New Jersey Life Producer Law Practice Test

Question: 1 / 400

What is meant by "premium" in life insurance terminology?

The amount paid to the insurance company for coverage

In life insurance terminology, "premium" refers to the amount paid to the insurance company for coverage. This payment is typically made on a regular basis, such as monthly or annually, and it secures the insurance policy for the insured individual. The premium is crucial because it determines the amount of coverage the policyholder receives and helps fund the risks that the insurer assumes.

Understanding the concept of premium is vital in life insurance since it influences the overall cost of the policy and the benefits that the policyholder will ultimately receive. If the insured fails to pay the premiums, the policy could lapse, leading to the loss of coverage and benefits. Therefore, comprehending what a premium is and its implications is fundamental for anyone engaging with life insurance products.

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The total death benefit provided by the policy

The interest earned on a savings account

The tax levied on the policyholder's estate

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