A payment made to an insurance company to cover the costs of an insurance policy is called:

A payment made to an insurance company to cover the costs of an insurance policy is called:

• A. a policy
• B. a dividend
• C. a beneficiary
• D. a premium

Answer: (D)

A payment made to an insurance company to cover the costs of an insurance policy is referred to as a premium. This payment is typically made on a regular schedule, such as monthly or annually, and secures the policyholder coverage against specified risks outlined in the insurance agreement. The purpose of the premium is to fund the insurance policy, allowing the insurance company to provide financial protection when claims are made. In contrast, a policy refers to the actual insurance contract that outlines the terms, coverage, and exclusions of the insurance. A dividend is a distribution of a portion of a company's earnings to its shareholders, which is not applicable to individual payments for insurance coverage. A beneficiary is the person or entity designated to receive the benefits from an insurance policy when a claim is made, such as upon the death of the policyholder. Understanding these distinctions highlights the role of premiums as a vital component in maintaining coverage and ensuring that the terms of the policy can be fulfilled.

A payment made to an insurance company to cover the costs of an insurance policy is referred to as a premium. This payment is typically made on a regular schedule, such as monthly or annually, and secures the policyholder coverage against specified risks outlined in the insurance agreement. The purpose of the premium is to fund the insurance policy, allowing the insurance company to provide financial protection when claims are made.

In contrast, a policy refers to the actual insurance contract that outlines the terms, coverage, and exclusions of the insurance. A dividend is a distribution of a portion of a company's earnings to its shareholders, which is not applicable to individual payments for insurance coverage. A beneficiary is the person or entity designated to receive the benefits from an insurance policy when a claim is made, such as upon the death of the policyholder. Understanding these distinctions highlights the role of premiums as a vital component in maintaining coverage and ensuring that the terms of the policy can be fulfilled.