Other Than Life (OTL) Practice Exam 2026 – All-In-One Guide to Exam Success!

In the context of insurance, "premium" specifically refers to the payment made for policy coverage. It is the amount that the policyholder must pay to the insurance company in order to maintain the policy and receive the financial protection or benefits outlined in that policy. This payment can be made on a regular basis, such as monthly or annually, and is crucial for keeping the insurance coverage active.

The other options do not accurately define "premium." For instance, the amount paid for claims refers to the insurer's obligations when a covered event occurs, rather than the cost of the insurance itself. The limit of insurer liability pertains to how much the insurer will pay out in the event of a claim, which also does not equate to the premium. Lastly, the risk factor evaluation relates to the assessment of the likelihood and potential impact of claims based on various risk elements but is not the payment made for insurance coverage. Thus, understanding that the premium is specifically the cost required to purchase insurance is key to grasping this important insurance term.