Question

Interest earned on premiums paid to an insurer helps to ________ the premiums charged.

Answer 1

The interest earned on premiums helps to offset the premiums charged by insurance companies.

Step-by-step explanation:

The interest earned on premiums paid to an insurer helps to offset the premiums charged.

Insurance companies receive income from insurance premiums and investment income. They invest the funds they receive, earning a rate of return. This income can be used to offset the premiums charged to policyholders. By earning investment income, insurance companies can reduce the overall cost of insurance for their customers.

For example, if an insurance company charges $100 in premiums and earns $10 in interest income, they can use the interest income to reduce the premiums charged to $90, making insurance more affordable for policyholders.

Answer 2

Interest earned on premiums paid to an insurer helps to LOWER the premiums charged.

Step-by-step explanation:

An insurance premium is the amount of money an individual or business pays for an insurance policy. Insurance premiums are paid for policies that cover healthcare, auto, home, life, and others.

Once earned, the premium is income for the insurance company. It also represents a liability, as the insurer must provide coverage for claims being made against the policy. Failure to pay the premium may result in the cancellation of the policy.