Question

The amount which is paid by the first party to the second party to cover the potential loss is called .............

Hint:

Without paying the premium, the insurance contract is not valid — premium is the price of protection.

Answer 1

In an insurance contract, there are two main parties: the insured and the insurer.
The insured is the person or entity buying protection against possible future risks.
To receive this coverage, the insured pays a certain fixed or regular amount to the insurer.
This payment is known as the premium.
The premium is the cost of transferring the risk from the insured to the insurer.
In return for the premium, the insurance company promises to compensate for any financial loss caused by specified risks.
Premiums can be paid monthly, quarterly, annually, or as agreed in the policy.
Thus, the amount paid by the first party (insured) to the second party (insurer) is called the Premium.