Answer to Question #205389 in Financial Math for Naa

Question

Difference between rate and Premium.

Difference between rate making and rating.

Answer 1

A rate is a price of an insurance unit for a period of one year commonly expressed as a price per $100 or $1000 of coverage.

A premium is the total cost of an insurance policy or part thereof. i.e it is the rate multiplied by insurance amount.

Rate making is the process of determining rates for each class of insurance.

Rating is the application of established rates to the specific items to be insured