Premium

Filed Under » ,
Dictionary Says

Definition of 'Premium'

1. The total cost of an option.

2. The difference between the higher price paid for a fixed-income security and the security's face amount at issue.

3. The specified amount of payment required periodically by an insurer to provide coverage under a given insurance plan for a defined period of time. The premium is paid by the insured party to the insurer, and primarily compensates the insurer for bearing the risk of a payout should the insurance agreement's coverage be required.
Investopedia Says

Investopedia explains 'Premium'

1. The premium of an option is basically the sum of the option's intrinsic and time value. It is important to note that volatility also affects the premium.

2. If a fixed-income security (bond) is purchased at a premium, existing interest rates are lower than the coupon rate. Investors pay a premium for an investment that will return an amount greater than existing interest rates.

3. A common example of an insurance premium comes from auto insurance. A vehicle owner can insure the value of his or her vehicle against loss resulting from accident, theft and other potential problems. The owner usually pays a fixed premium amount in exchange for the insurance company's guarantee to cover any economic losses incurred under the scope of the agreement.

Articles Of Interest

  1.

    Women And Finances: Is There A Gender Bias?

    Uncover some very complex reasons for female gender biases in the finance world.

  2. Can I Get Life Insurance?

    Find out what you can do to get the coverage you need for the right price.

  3. Should You Bite On Dental Insurance?

    Don't pay for a plan that won't cover your pearly whites when you need it to.

  4. Avoid Tricky Tax Issues On Municipal Bonds

    Learn the rules every investor should know before buying into this "tax-free" investment.

  5. Beginner's Guide To Auto Insurance

    Find the perfect policy that suits both your coverage and budgetary needs.

  6. How An Insurance Company Determines Your Premiums

    Find out how insurers use credit history to build an insurance score and how it could affect your bottom line.

  7. Using Logic To Examine Risk

    Know your odds before you put your money on the table.

  8. Options Basics Tutorial

    Discover the world of options, from primary concepts to how options work and why you might use them.

  9. Choosing The Best Disability Insurance

    Social Security benefits can be hard to collect. Find out why you need disability insurance to protect your income, and learn how to choose the right policy for you.

  10. How To Sell Put Options To Benefit In Any Market

    As long as the underlying stocks are of companies you are happy to own, put selling can be a lucrative strategy.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Racketeering

    Racketeering refers to criminal activity that is performed to benefit an organization such as a crime syndicate. Examples of racketeering activity include...

  2. Lawful Money

    Any form of currency issued by the United States Treasury and not the Federal Reserve System, including gold and silver coins, Treasury notes, and Treasury bonds. Lawful money stands in contrast to fiat money, to which the government assigns value although it has no intrinsic value of its own and is not backed by reserves.

  3. Fast Market Rule

    A rule in the United Kingdom that permits market makers to trade outside quoted ranges, when an exchange determines that market movements are so sharp that quotes cannot be kept current.

  4. Absorption Rate

    The rate at which available homes are sold in a specific real estate market during a given time period.

  5. Yellow Sheets

    A United States bulletin that provides updated bid and ask prices as well as other information on over-the-counter (OTC) corporate bonds...

  6. Bailment

    The contractual transfer of possession of assets or property for a specific objective.
Trading Center