California Insurance License Exam Practice Test Practice Question
What is the definition of premium?
Correct Answer: B
Rationale: Premium refers to the amount of money an insured pays to an insurer in exchange for coverage and benefits outlined in the policy. This payment is essential for maintaining the insurance contract and securing protection against potential losses.
Option A is incorrect as it describes a bonus, which is not related to the standard definition of premium. Option C reverses the roles, suggesting that the insurer pays the insured, which misrepresents the relationship. Option D, while related to the cost of coverage, is too narrow, focusing only on the per-unit aspect rather than the comprehensive definition of premium as a payment for benefits.
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