CAIB Three Practice Exam 2026 – Complete Study Resource

The term "premium" in insurance specifically refers to the amount that a policyholder pays to the insurer in exchange for coverage. This payment can be made in various intervals, such as monthly, quarterly, or annually, depending on the terms of the insurance contract. The premium is a critical component of the insurance relationship, as it is the means through which the insurer funds coverage and pays claims.

In the context of insurance policies, the premium not only reflects the cost of the policy itself but also incorporates various factors such as risk assessment, coverage limits, and the type of coverage chosen by the policyholder. Understanding what constitutes a premium is essential for both insurance professionals and clients, as it directly impacts financial planning and risk management.

The other options reflect important aspects of insurance but do not accurately define what a premium is. A summary of claim history relates to the record of claims made under a policy, the maximum payout amount refers to the insurer's limit for coverage under a specific policy, and a type of insurance policy describes various products that offer different kinds of protection. However, none of these definitions capture the essence of a premium.