The pure rate of premium is arrived at on the basis of past loss experience.Therefore, statistical data regarding past losses is most essential for purposes of calculating rates
The pure premium is suitably loaded or increased by adding percentages to provide for expenses, reserves and profits
Premium rates are quoted for a period of 12 months. If a policy is taken for a shorter period, the premium is charged according to a special scale, known as short period scale.
Need for short period scales - Expenses involved in the issue of the policy whether for a 12 months period or a shorter period, are almost the same, Preferred when insurance are seasonal in character and the risk is greater during that season
Sum Insured - the maximum amount that an insurance company will indemnify as per policy condition. Always fixed by the insured and is the limit of liability under the policy.
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