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 pmium 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.

1. The pmium 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 pmium.

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

3. A common example of an insurance pmium 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 pmium amount in exchange for the insurance company's guarantee to cover any economic losses incurred under the scope of the agreement.