What does ‘premium’ mean?

When it comes to insurance, such as home insurance, ‘premium’ is just a fancy word for your upfront cost, normally paid per year or per month.

So, why do they call it your premium and not just your cost? Well, we expect it’s because there’s more than one type of cost involved in insurance.

You have your premium, which you pay each month or year, but you also have your excess, which is a sum of money you have to pay if you make a claim (making a claim is when you ask your insurance provider to pay for something for you). At least this way, it’s easier to tell them apart!

Nuts About Money tip

It could be cheaper to pay your premium all in one go each year, rather than on a monthly basis - check your options when you buy.

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