Market & Policy · Insurance Term
Premium
Definition
A premium is the price you pay for an insurance policy for a set period, usually one year. It is based on the insurer's rates, the details of your property or business, your loss history and market conditions.
In Plain English
Insurers start with a rate, such as a dollar amount per $100 of insured value, and apply it to your exposure. They then adjust for construction, fire protection, location, loss history and other factors. Taxes and fees may be added on top.
Some premiums are estimates. Policies rated on payroll or sales — like workers' compensation or general liability — may be adjusted after the policy ends through a premium audit.
You can usually pay in full, in installments, or through a premium finance agreement. If a policy is canceled early, the insurer may keep part of the premium, especially when there is a minimum earned premium.
Not sure how your policy handles this? Have us review it, or get a quote.
Example
Hypothetical and simplified: a building insured for $2 million at a rate of $0.40 per $100 of value would have a base property premium of $8,000 ($2,000,000 ÷ 100 × $0.40), before taxes, fees or other coverages.
Why It Matters for Texas Property Owners
Coverage placed with a surplus lines insurer in Texas carries a 4.85% premium tax (Ins. Code §225.004) plus a small stamping fee, added to the quoted premium. Make sure quotes you compare show these amounts the same way.
What to Watch For
- Ask for the premium broken out by coverage, taxes and fees.
- Find out whether any part of the premium is subject to audit.
- Check how much would be refunded if you cancel early.
- Commercial property pricing eased nationally in 2026, so ask whether your renewal reflects the current market.
Sources
- Texas Insurance Code §225.004 (surplus lines premium tax rate)
- Insurance Journal — CIAB Q2 2026 commercial market report
Last updated October 14, 2026 · Primesure editorial team · How We Write