Direct premium refers to which portion of the premium?

• A. The portion of premium allocated to the insurer for assuming risk before deductions for agents' commissions and other charges.
• B. The portion of premium allocated to the insurer after deductions for agents' commissions and other charges.
• C. The portion of premium allocated to the insured.
• D. The portion of premium used for taxes and fees.

Answer: (C)

Direct premium is the portion of the premium that is allocated to the insured—the amount set aside to fund the actual insurance protection and benefits promised to the policyholder. It represents the cost of the coverage itself, separate from amounts used to pay agents’ commissions, administrative charges, or taxes. In other words, this is the part of the premium that corresponds to the protection provided by the policy, not the insurer’s selling or operating costs.