Rhode Island Insurance Adjuster Exam

In an auto insurance policy, which term refers to the payment made to the insurance company to provide coverage?

1. Deductible

2. Premium

3. Claim

4. Policy limit

The correct answer is: Premium

The term that refers to the payment made to the insurance company to obtain coverage is "premium." The premium is essentially the cost of the insurance policy, paid periodically—such as monthly, quarterly, or annually—by the policyholder. This payment is crucial because it ensures that the insured party receives coverage for potential losses or damages as specified in the policy. In contrast, a deductible is the amount that the policyholder must pay out of pocket before the insurance company covers the remaining costs; claims are requests made to the insurer for payment based on a covered loss or damage, and policy limits define the maximum amount the insurance company will pay for a covered loss under the policy. Understanding these terms helps in grasping the fundamental aspects of how insurance policies operate.