Which of the following statements correctly describes the difference between gross premium and net premium?

Insurance

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Which of the following statements correctly describes the difference between gross premium and net premium?

A

Gross premium is the total amount paid for the policy. Net premium does not include the insurance company’s cost of doing business, such as paying claims and other expenses

B

Gross premium is what the insured pays to the insurance company each month; Net premium is what the agent’s commission is based on

C

Net premium is the total paid to the insurance company each month; Gross premium is described in terms of the number of dollars per $1000 a person pays for his/her insurance

D

The net premium is the cost per $1,000 of insurance, the gross premium excludes insurance company expenses

Answer: A

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