Adjustable Premium

DEFINITION of 'Adjustable Premium'

An insurance premium that can move up or down over time based on a policy that is agreed to at the outset of an insurance contract. There are several factors that may cause your adjustable premiums to change, including the varying costs of maintaining the contracts.

Also known as a "variable premium."

BREAKING DOWN 'Adjustable Premium'

An adjustable premium in the insurance industry is similar in structure to an adjustable-rate mortgage, because in both cases you can expect that the amount you need to pay will change. A policy that costs the insurance company more than they expect will cause adjustable premiums to increase; on the other hand, factors such as higher-than-expected investment returns on the part of the insurance company could cause the amount of the premiums to decline.