Insurance is a Contract, there are two parties in the contract of Insurance, Insurer and Insured. The insured gives premium as a consideration in return of which insurer undertakes to pay a certain amount at a specified contingency. There is no precise definition of the Insurance Contract, Several Jurists tried to define it. Some of the Important Definitions are given here.
Meaning of Premium -
Premium is a price that insurer charges from the insured, either lumpsum of or in installments assured for covering some certain or ascertainable perils or risks. The price varies from insurer to insurer, as with any product or service.
Different types of insurance cover require different premiums based on the degree of risks.
A policy insuring a house valued at $50,000 for fire requires a higher premium that one insuring a bike valued $25,000.
Although the degree of risk insured might be similar, the cost of repairing the house is much higher than the bike and this difference is also seen in the premium paid by the insured.
Definitions of Premium -
According to the MacMillan Dictionary, " regular payment made to an insurance company so that you are protected by the insurance."
National Insurance Company Limited defines premium as, "premium is fixed amount of sum paid over the period by ensured to the insurer in order to secure an insurance policy and to complete the contract of insurance
In Lucena Vs Crawford, Lawrence J defined premium as "a price paid adequate to the risk".
Generally, the premium is paid in cash. But it is up to the insurer to accept the payment in any other modes such as cheque, promissory note, bill of exchange, credit card, post, etc.
Mode of Payment of Premium (Insurance Law)
Difference between Promissory Note and Cheque
See... Difference between Promissory Note and bill of exchange
Difference Between Cheque and Bill of Exchange | Law of Contract