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Premium

A premium is the amount of money an individual or organization pays to an insurance company in exchange for coverage under an insurance policy. It is the cost of maintaining protection against financial loss and ensures that the insurer can pay claims, manage risk, and cover administrative expenses. Premiums can be paid monthly, quarterly, semi-annually, or annually, depending on the policy and payment arrangement.

How It Works

A health insurance premium is the regular payment you make to your insurance provider in exchange for the coverage you were approved for, and it is usually charged monthly, sometimes yearly. Insurers set the amount through a process called underwriting, which evaluates factors such as your age, your health and medical history, whether the policy includes dependants, and what the plan covers. The more coverage a plan offers, the higher the premium is likely to be, and older applicants are likely to pay more than younger ones. When you have workplace health benefits, the premium is often shared between you and your employer, but with individual health insurance you are responsible for the entire premium.

Example:

Suppose you buy an individual health and dental plan in Canada to cover prescription drugs, dental cleanings, and vision care that provincial Medicare does not. The recurring payment you send to the insurer to keep that plan active is your premium, which is separate from any deductible you pay before coverage kicks in. You might arrange to pay it monthly or annually, and as long as you keep paying it on time, your coverage stays in force and the insurer is obligated to pay eligible claims. If you instead got that coverage through your employer's group plan, your employer would typically cover part of the premium and deduct your share from your pay.

What to Watch For:

The premium is separate from your deductible, which is the amount you must pay yourself toward extended services before your coverage kicks in. Pay your premiums on time, because if they are not paid within the grace period, the policy may lapse and your coverage will end. If your coverage is through a workplace plan and your employer pays premiums or makes contributions on your behalf, keep in mind that the amount paid may be a taxable benefit.

Related Terms

Policy (Contract)

A policy, also referred to as a contract, is the legally binding agreement between an insurance company (the insurer) and the policyholder that defines the terms, conditions, and obligations of coverage. It outlines what is insured, the benefits provided, the premium amount, exclusions, and the responsibilities of both parties. Once the insurer accepts the application and the first premium is paid, the policy becomes active and enforceable.

Underwriting

Underwriting is the process by which an insurance company evaluates an applicant’s risk to determine whether coverage can be offered, what terms will apply, and how much the premium will cost. It involves reviewing personal, medical, occupational, and lifestyle information to assess the likelihood of future claims. The goal of underwriting is to ensure fairness by matching the cost of coverage to the level of risk presented by each applicant.

Plan Member

A plan member is an individual who is enrolled in and eligible to receive benefits under a group insurance plan. Typically, the plan member is an employee of a company or a member of an organization that sponsors the group policy. The plan member is covered for the benefits outlined in the plan - such as health, dental, life, and disability insurance - and may also extend coverage to eligible dependents, including a spouse or children.

Plan Sponsor

A plan sponsor is the employer, association, or organization that establishes and maintains a group insurance plan for its employees or members. The plan sponsor acts as the policyholder, holding the master contract with the insurance company and determining the benefits, eligibility rules, and cost-sharing arrangements for the group. Plan sponsors play a central administrative role by enrolling members, collecting premiums, and communicating plan details to participants.

Insurer

An insurer is the insurance company or organization that provides financial protection to individuals or groups in exchange for premium payments. The insurer assumes the risk of potential loss and agrees to pay benefits for covered claims according to the terms of the policy. Insurers evaluate applications, determine premiums, issue policies, and manage claims through underwriting and administration processes.

Relevant Plans

Plans that relate to Premium

Alberta Blue Cross - Blue Assured - Basic

Alberta Blue Cross - Blue Assured - Basic

Can apply at anytime, at any age.

Alberta Blue Cross - Blue Assured - Enhanced

Alberta Blue Cross - Blue Assured - Enhanced

Can apply at anytime, at any age.

Alberta Blue Cross - Blue Assured - Enhanced+

Alberta Blue Cross - Blue Assured - Enhanced+

Can apply at anytime, at any age.

Alberta Blue Cross - Blue Assured - Premium

Alberta Blue Cross - Blue Assured - Premium

Can apply at anytime, at any age.

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