What does the term "premium" refer to in life insurance?

In life insurance, the term "premium" specifically refers to the amount paid by the policyholder to the insurer in order to keep the policy active. This payment is typically made on a regular basis, such as monthly or annually, and is essential for maintaining coverage. The premium not only covers the cost of risk to the insurance company but can also contribute to the cash value of certain types of policies, such as whole life insurance.

While the benefit paid out to beneficiaries is crucial, it is not synonymous with the term "premium." The total cash value of the policy, which may accumulate over time in permanent life insurance types, also differs from the premium since it is a separate aspect of the policy that reflects the policy's savings component. Lastly, deductibles pertain to certain types of insurance and refer to the amount that the insured is required to pay out of pocket before the insurance coverage begins; this concept does not relate to the regular payment made to keep a life insurance policy active.