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premium

PREE-mee-uhm /ˈpriːmiəm/

nounB2GMATIELTSTOEFL

formalprofessionalfinancial

The periodic payment made to an insurance company to keep an insurance policy active.

A premium is paid regularly (usually monthly) regardless of whether you actually use any medical services during that period. It is the baseline cost of having insurance.

The story behind the word. In ancient Rome, a 'praemium' was a reward, booty, or prize won through effort or battle, derived from 'prae' (before) and 'emere' (to take or buy). Over the centuries, the word shifted from a reward given to someone, to the fee paid to secure a guarantee of protection.

Word relationships

subscription fee: Subscription fee is used for services like software or magazines, whereas premium is strictly reserved for insurance contracts.
contribution: Contribution often refers to the portion of the premium paid by an employer or employee in a group plan.

payout: A payout is money received from the insurance company, whereas a premium is money paid to the insurance company.

Commonly confused with

deductible: A premium is paid regularly to keep the policy active; a deductible is the amount you must pay for care before the insurance starts paying.

Word family

premiums (noun): Plural form of premium.

Collocations

monthly premium
annual premium
premium payment
insurance premium

Example sentences

"The average annual premium for family coverage reached a new high this year, forcing many employers to adjust their benefit packages." A real-world explanation of rising health insurance costs in a major publication.
"Even if you do not visit a doctor all year, you must continue to pay your monthly premium to maintain your health coverage." An explanation of how premiums are paid.

Memory hook

Think of a premium as the 'membership fee' you pay to be part of the 'premium' health club of insured individuals. Pay the premium to keep the policy alive.

When not to use

Do not confuse this with a copayment or deductible, which are only paid when you actually receive medical care. Also, do not use it to mean 'high quality' in a financial transaction context, though that is a common secondary adjective definition.

Fun facts

In the 17th century, the term premium was used in maritime insurance to describe the incentive paid to underwriters to take on the risk of lost cargo.