Alabama Insurance Adjuster Practice Exam

Disable ads (and more) with a membership for a one time $2.99 payment

Prepare for the Alabama Insurance Adjuster Test. Enhance your readiness with flashcards and multiple choice questions, complete with hints and explanations. Gear up for your exam!

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.

What does the term 'insurance premium' refer to in an insurance policy?

The amount insured pays for coverage
The total value of the policy
The deductible amount in a claim
The claim amount payable to a policyholder

The correct answer is: The amount insured pays for coverage

The term 'insurance premium' refers to the amount an insured individual pays to an insurance company in order to maintain coverage under an insurance policy. This payment can be made in various frequencies—monthly, quarterly, or annually—and is essential for the insurance company to provide financial protection against specified risks. The premium is determined based on several factors, including the type of coverage, the policyholder's risk profile, and the overall value of the coverage being provided. Understanding that the premium is essentially the cost of buying the insurance helps clarify the fundamental relationship between the insured and the insurer. Unlike the total value of the policy or claim amounts, the premium is a regular obligation that the policyholder must fulfill to keep the insurance in force. The deductible, on the other hand, refers to the specified amount that the policyholder must pay out-of-pocket when a claim is made before the insurance coverage kicks in. Overall, recognizing that the premium is the payment made for coverage is crucial for anyone working in the insurance industry.