Jurisdiction(s):
United Kingdom

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Key definition

Insurance premium definition

What does Insurance premium mean? In legal practice, an insurance premium is the price paid (or contractually payable) to an insurer in return for cover under an insurance policy. In litigation it commonly means the after-the-event (ATE) insurance premium: the amount due for a policy that protects a party against adverse costs and, sometimes, own disbursements or fees if the claim is unsuccessful. ATE premiums are often staged, or deferred and contingent on success. “Premium” is a descriptive term used across insurance and civil procedure; statutes and case law generally treat it as the consideration for cover rather than provide an exhaustive definition. Recoverability in costs: -...

Insurance Premiums: Calculation, Additional and Return Premiums, Payment Terms, Warranties/Conditions Precedent, Broker Transmission (Marine and Non-marine), Net Accounting and Bordereaux, and FCA Pricing/Consumer Duty Rules (UK)

Published by a LexisNexis Insurance & Reinsurance expert

Practice notes

An insurance premium is the amount paid for insurance or reinsurance protection and is the consideration the (re)insured gives in return for the (re)insurer’s contractual undertaking to indemnify it for risks set out in the policy. premium funds are used by (re)insurers mainly to:

build reserves for both reported and unreported losses
settle claims
generate investment returns
purchase reinsurance
meet regulatory solvency margin obligations
pay Insurance Premium Tax (IPT) to HMRC

For more on IPT, see Practice Note: tax.

Calculating the insurance premium

Underwriters and actuaries determine the premium in line with their assessment of risk, and the method varies by class of business. Life and health pricing is largely a mathematical exercise performed by actuaries using extensive longevity and morbidity data, reflecting current and long-term inflation and expected investment returns. Some general lines, such as motor, can also be priced on this basis where there is a sufficiently broad statistical data set and a large enough volume of policies written on comparable terms to set rates accordingly...

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Web page updated on 21/05/2026

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