Guaranteed cost premium

Guaranteed cost premium,

Definition of Guaranteed cost premium:

  1. Most policyholders are familiar with the guaranteed cost approach to determining the premiums that they pay for insurance. An individual or business purchases a policy to cover a specified peril for a specified period of time, and is charged a flat rate for the duration of the policy. While the insurance company does take into account the type of peril, the potential severity and frequency of claims, and the riskiness of the insured, the premium is not adjusted once it has been published.

  2. A premium based on another factor besides loss experience, for example, a certain specified rating. The cost is guaranteed because it will never be adjusted on the basis of the insureds loss experience during the policys term.

  3. Guaranteed cost premium refers to cost premiums charged for an insurance policy that are not adjusted for loss experience. Guaranteed cost premium represents a flat fee that the insured pays for coverage over a policy period.

Meaning of Guaranteed cost premium & Guaranteed cost premium Definition