What Is Premium? Definition | Epic Life Glossary

Why it matters

Premium is based on your age, health, tobacco use, coverage amount, and policy type. Term policies cost less than permanent ones at the same coverage. If you stop paying, the policy can lapse after the grace period. Paying monthly often costs a little more than paying yearly. Always check whether the premium is level or can rise.

Source: law.cornell.edu

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Related terms

Level Premium: A level premium is a payment that stays the same for the life of the policy or for a set period, such as a 20-year term. It does not rise as the insured gets older.
Modal Premium: A modal premium is the payment amount for a chosen schedule, or mode, such as monthly, quarterly, or annual. Carriers often charge a small fee for more frequent payments.
Grace Period: A grace period is the extra time after a premium due date when the policy stays in force even though the payment is late. Many policies give 30 or 31 days.
Lapse: A lapse happens when a life insurance policy ends because the owner did not pay the premium by the end of the grace period. Coverage stops unless the policy is reinstated.
Premium Rate: A premium rate is the price a carrier charges per unit of coverage, often per $1,000, based on the insured's age, sex, class, and plan. The total premium comes from this rate.

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