How Do You Spell NET PREMIUM?
Pronunciation: [nˈɛt pɹˈiːmi͡əm] (IPA) 
Pronunciation: [nˈɛt pɹˈiːmi͡əm] (IPA)
Net premium refers to the amount of money an insured individual or entity pays to an insurance company in order to secure coverage for a specific period of time. It represents the actual cost of insurance, excluding any additional fees or charges.
Net premium is calculated by subtracting any discounts or credits from the gross premium. These deductions can include factors such as the insured's age, health history, or the nature of the insured property. It is the net premium that ultimately determines the amount of risk the insurer is taking on and the revenue they receive from the policyholder.
The net premium takes into account the insurer's assessment of the probability and potential extent of a claim. This assessment is based on actuarial data, which analyzes historical trends and statistical probabilities to estimate risk. The insurer must consider various factors in setting the net premium, such as the insured's risk profile, the coverage amount, and the policy duration.
Net premium is a fundamental concept in insurance, as it underpins the financial stability of insurers. It allows insurers to accurately assess the revenue they can expect to receive from policyholders and allocate resources accordingly.
In summary, net premium refers to the actual cost of insurance after applying deductions or discounts. It is the amount paid by the insured to the insurer for coverage and is a crucial element in insurance contracts.
The annual payment on a life insurance policy which, if invested at a predetermined rate of interest, will be necessary exactly to equal the amount of the policy at the expiration of the life expectancy of the insured; see loading.
A practical medical dictionary. By Stedman, Thomas Lathrop. Published 1920.
The etymology of the word "net premium" can be understood by examining the origins of its components:
1. Net: The term "net" derives from the Old English word "nett", which meant "remaining after deductions or expenses". It has its roots in the Proto-Germanic word "natjan" and relates to concepts of cleanliness, tidiness, and neatness. Over time, "net" has come to signify the resulting amount or value after certain deductions or considerations.
2. Premium: It originates from the Latin word "praemium", which referred to a reward or prize. The Latin term was further derived from the root "praemere", meaning "to take", implying a token given to obtain or secure something extra. The word "premium" took on the meaning of a payment made for an insurance policy or an additional amount charged for a particular service or product.
