Some policies cost more to issue and service than the risk-based premium alone would justify. A minimum premium is the lowest amount the insurer will accept for a policy, regardless of how small the calculated exposure premium is. It ensures that fixed costs are covered.

Minimum premiums appear in commercial lines where audit-based pricing could otherwise produce negligible charges for tiny risks. They also appear in certain personal lines and specialty products. The minimum is stated in the policy or rating manual and applies even if the audited exposure would generate a lower figure.

Insureds with very small exposures may find the minimum premium makes the coverage relatively expensive per unit of risk. Insurers periodically review minimums to keep them aligned with actual expense levels. Clear disclosure at quotation avoids later disputes when the bill arrives.

• Lowest premium the insurer will charge for a policy
• Protects recovery of fixed costs
• Applies even when exposure-based premium is lower
• Common in auditable commercial lines