Certified Financial Consultant (CFC) Practice Exam

What is the term for the fee a policyowner must pay to the insurance company to maintain coverage?

1. Deductible

2. Premium

3. Coinsurance

4. Rider

The correct answer is: Premium

The term that refers to the fee a policyowner must pay to the insurance company to maintain coverage is known as the premium. This is a critical aspect of insurance policies as it represents the cost of obtaining and retaining the coverage provided by the insurance policy. The premium is typically paid on a regular basis, such as monthly, quarterly, or annually, and is essential for the insurance company to manage risk and provide benefits to policyholders when a claim is made. Other terms mentioned have distinct meanings that do not pertain directly to the cost of maintaining coverage. The deductible refers to the amount that a policyholder must pay out of pocket before the insurance company starts covering expenses. Coinsurance describes the percentage of costs that the insured must pay after the deductible has been met, reflecting a shared payment obligation between the insurer and the insured. A rider is an add-on to an insurance policy that provides additional coverage or modifies the terms of the policy but does not relate to the ongoing cost of maintaining the policy itself.