Term
Insurance premium
The price of insurance cover, paid by the policyholder under the contract. The same Slovak word also covers social and health insurance contributions calculated from the assessment base.
Updated
What it means
The premium is the price of cover: the amount the policyholder pays under the insurance contract monthly, quarterly or once a year. It is built from risk, sum insured, excess and claims history, not from what the client can spare.
Slovak uses the same word for levies: social and health insurance contributions are calculated from the assessment base and have nothing to do with a commercial insurer. The context has to tell you which one is meant.
The premium is not the sum insured: the sum insured caps the payout, the premium is what the cover costs. A higher excess or a lower limit brings the premium down because the company keeps part of the risk itself, which makes it a decision about risk, not only about price.
How it works in practice
A commercial premium is tax deductible where the insured asset or risk belongs to the business. Paid up front for several periods, it enters costs gradually through accruals, not in full in the month it leaves the account.
The premium charged on non-life cover includes insurance tax, which the insurer remits; insurance itself is VAT exempt, so there is nothing on the document to deduct. If the premium goes unpaid after a reminder and a grace period, the cover ends.
Where the company pays a premium for an employee or a director, for example life insurance, it is usually that person’s taxable non-cash income and goes through payroll. So we go through every such policy with the client before the first payment, to get both payroll and costs right.
What to watch out for
The most expensive mistake is a standing order dropped when the bank changed. Cover lapses for non-payment, nobody notices, and the company finds out at the claim, when there is no cover left to claim on and the whole loss stays with the company.
A premium for the director’s family home or private car paid from the company account is a non-deductible expense. At audit it is added back to the tax base, and it may also be treated as income of the member, so one payment triggers extra tax twice.
Need the term explained on your own situation? Consulting from €55 / hour excl. VAT, depending on topic and complexity.