DEFINITION of 'Advance Premium'

The initial premium paid to bind an insurance policy for a given period of time. The most commonly known use of the term "advance premium", is with respect to fluctuating insurance payments, such as payroll-based policies, where the actual amount due is not known until after the fact.

BREAKING DOWN 'Advance Premium'

Advance premium can also refer to pre-paid premiums, where the policyholder makes a premium payment before it is due.

RELATED TERMS
  1. Premium Balance

    The amount of premium that is owed to an insurer for a policy, ...
  2. Earned Premium

    The amount of total premiums collected by an insurance company ...
  3. Advance Premium Mutual

    A mutual insurance company that operates as an advance premium ...
  4. Developed To Net Premiums Earned

    The ratio of developed premiums to net premiums earned over a ...
  5. Net Premiums Written

    The sum of premiums written by an insurance company over the ...
  6. Adjustable Premium

    An insurance premium that can move up or down over time based ...
Related Articles
  1. Financial Advisor

    What Is Mode of Premium?

    Your decision on how frequently to make life insurance payments, or your mode of premium, can have a big impact on your total costs.
  2. Insurance

    Explaining Premiums

    Premium has a few different meanings in the financial world.
  3. Insurance

    Understanding Taxes on Life Insurance Premiums

    Learn about the tax implications of life insurance premiums, including when they might be taxable and whether they are tax deductible.
  4. Insurance

    Life Insurance Premium Financing: Worth the Risk?

    Life insurance premium financing lets high net worth individuals buy costly insurance without liquidating assets.
  5. Insurance

    5 Ways to Lower Life Insurance Premiums

    Learn several effective methods for lowering life insurance premiums. These include quitting smoking and considering term life insurance.
  6. Financial Advisor

    Permanent Life Policies: Whole Vs. Universal

    If you're looking for life-long security, choosing between these two is the key.
  7. Insurance

    Does Buying a Guaranteed Life Insurance Policy Make Sense?

    When does it make sense to buy a life insurance policy that is guaranteed?
  8. Insurance

    Dividend-Paying Whole Life Insurance: What to Know

    Many whole life insurance policies pay dividends. Here are what policyholders need to consider.
  9. Financial Advisor

    Advising FAs: Explaining Life Insurance to a Client

    Life insurance was initially designed to protect the income of families, particularly young families in the wealth accumulation phase, in the event of the head of household's death.
RELATED FAQS
  1. How does adverse selection affect insurance premiums?

    Find out what causes adverse selection in the insurance market and why it drives up premiums for all policyholders. Read Answer >>
  2. Is market risk premium the same for all investors and investments?

    Learn about how market risk premiums are determined, how they are calculated, why some assets require higher premiums and ... Read Answer >>
Hot Definitions
  1. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  2. Down Round

    A round of financing where investors purchase stock from a company at a lower valuation than the valuation placed upon the ...
  3. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  4. Portfolio Investment

    A holding of an asset in a portfolio. A portfolio investment is made with the expectation of earning a return on it. This ...
  5. Treynor Ratio

    A ratio developed by Jack Treynor that measures returns earned in excess of that which could have been earned on a riskless ...
  6. Buyback

    The repurchase of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies ...
Trading Center