Insurance premium

The insurance premium refers to the insurance premium payable by law in the case of compulsory insurance or voluntary insurance under the terms of the contract, through which the insurance fund is formed.

The insurance contribution as a concept, according to its content, has three forms of manifestation:

• Legal - manifested in the agreed in advance monetary expression of the insurance obligation, which is confirmed by the insurance contract concluded between the parties;

• Economic - acts as part of the national income allocated by the insured to guarantee its interests from the negative or undesirable impact of possible adverse events (insurance cases);

• Mathematical - is expressed in the form of a recurring periodic payment to the insurer by the insurer.

The cost of the insurance service is displayed in the amount of the insurance premium paid to the insurer, that is, in other words, it is the cost of the insurer's services provided to the client in the event of an insured event. Calculation of the insurance premium is made according to the insurance tariff. Legally, the insurance rate is defined as the rate of the insurance premium from the insurance object or the unit of the insured amount.

The insurance premium should be sufficient for:

• Coverage of expected claims during the entire insurance period;
• Creation of insurance reserves;
• Coverage of costs of the insurance company in case management;
• Ensuring a certain amount of profit.

The part of it, due to which the insurance fund is formed, that is, intended solely for insurance payments, is called a net premium, while the part that is directed at carrying out insurance to cover the costs of the insurer - the load. Net premium, therefore, is the cost of insurance, excluding the costs of its holding, available from the insurer. In fact, the insurance premium is a set of net premiums and loads, it is also called a gross premium.

Types of insurance premiums

Different technical aspects of the insurance premium are characterized by different concepts.

By designation, it is divided into:

• Risk premium intended to cover risk;

• A cumulative contribution that is present in life insurance contracts and covers the insurer's payments when the insurance period expires;

• Net premium, which covers insurance payments for a specific period of time for a certain type of insurance ;

• A sufficient contribution equal to the amount of the load and net premiums that are included in the costs of the insurer;

• The insurer's tariff rate , consisting of a sufficient contribution, as well as the surcharges necessary to cover expenses related to various preventive measures, propaganda and advertising, and other.

By the nature of risks, the insurance premium is classified into natural, which covers the risk for a specific period of time, and fixed, not changing with time, that is, constant.

Insurance premiums are divided according to the form of payment for:

• One-time payments, which are fully paid when insuring the insured forward;

• Current contribution is a certain part of a one-time premium, as it is part of the obligations accepted by the insured in relation to the insurer;

• A divided premium - a one-time premium is divided into an annual premium, which takes into account the economic possibilities of the insured, and it, in turn, can be divided into monthly, quarterly, semi-annual (in equal parts).

Insurance premiums are also divided according to the time of payment, by their reflection in the balance of the insurance company and by value.