A premium is a payment Tom would make to the insurance company. This payment is usually once a month.
Keep in mind that this is <u>not</u> money that is paid out to Tom. The amount he would pay per month would depend on a number of risk factors. The higher the risk, the larger the premium. For instance, if Tom is buying health insurance and he lives a fairly unhealthy lifestyle (eg: smoker who doesn't exercise), then his premiums are likely to be higher compared to those who stay fit. This is because Tom will likely use health services more often compared to fit individuals, and thereby meaning that the insurance company is paying out more.
