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Simple English definitions for legal terms
gross premium
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A quick definition of gross premium:
A gross premium is the total amount of money you pay for an insurance policy, including expenses and fees. It is the amount you pay to keep your insurance policy in effect. The gross premium can be broken down into different parts, such as the net premium (the amount that covers the estimated cost of claims) and the loading (the expenses and fees). The earned premium is the portion of the premium that applies to the coverage period that has already expired, while the unearned premium is the portion that applies to the coverage period that has not yet occurred.
A more thorough explanation:
Gross Premium
Gross premium is the total amount of money an insurance company charges for an insurance policy. It includes the net premium (the amount needed to cover claims) plus expenses and the loading (the amount added to the net premium to cover the insurer's costs and profit), minus the interest factor.
- If the net premium for a one-year insurance policy is $1000, and the insurer adds $200 for expenses and profit, and subtracts $50 for the interest factor, the gross premium would be $1150.
- In life insurance, the gross premium is the premium for participating insurance, which includes the cost of insurance, expenses, and the insurer's profit.
These examples illustrate how the gross premium is calculated by adding expenses and the loading to the net premium and subtracting the interest factor. The gross premium is the total amount the insurer charges the policyholder for the insurance policy.