In surplus lines insurance, what is meant by the term 'premium'?

In surplus lines insurance, the term 'premium' refers specifically to the amount paid by the insured for insurance coverage. This payment is a critical component of an insurance policy as it represents the cost incurred by the policyholder in exchange for the insurer's promise to provide coverage against specified risks. The premium can vary based on various factors, including the type of coverage, the insured's risk profile, and the specific terms of the policy.

Understanding this concept is vital, especially in the context of surplus lines insurance, where coverage is typically provided by non-admitted carriers for risks that are not easily insurable in the traditional market. The calculation of premiums in surplus lines may also take into account the unique risks associated with the coverage offered, which can lead to higher or more specialized premium amounts compared to standard insurance offerings.