What is "fractional premium" in insurance?

Fractional premium refers to the practice of paying an insurance premium in installments rather than as a single lump sum. This payment method allows policyholders to manage their cash flow more effectively by spreading the cost of the insurance over a period of time, which can make protecting oneself or their assets more financially feasible.

This concept is particularly helpful in scenarios where the total premium is substantial, and paying it all at once could impose a significant financial burden on the insured individual. By choosing to pay a fractional premium, policyholders can maintain coverage while still adhering to their budgeting needs.

The other options do not accurately describe fractional premiums. A one-time payment premium indicates a different form of payment structure, typically settled upfront without installment provisions. The option describing a premium reduced for multiple policies pertains to multi-policy discounts rather than payment structure. Lastly, premiums based on actual expenses usually pertain to types of insurance that calculate costs based on the risk and associated expenses rather than a structured payment plan.