What does the term 'premium refund' refer to?

The term 'premium refund' refers specifically to a return of part of the premium when coverage is unused or unnecessary. This typically occurs in situations where a policyholder has overpaid due to factors such as a decrease in risk, a change in circumstances, or if the coverage was not utilized during the policy term.

In many cases, insurance policies allow for a refund of unused premiums when, for example, a homeowner sells their house and cancels their property insurance before the policy has expired. This return acknowledges that the policyholder has paid for coverage that is no longer needed.

The other options describe different concepts that are not aligned with the specific definition of a premium refund. A full refund of paid premiums implies returning the entire amount for a policy, which is not typically the case unless a policy is canceled entirely. A premium discount for timely payments relates to incentives for maintaining a good payment history, which does not involve returning funds. Lastly, a bonus given to policyholders after a claim refers to a rewards system rather than a refund mechanism.