The premium protects the lender, not the buyer, in the event of default, which is the same underlying purpose a VA funding fee serves in the US system, just funded and administered differently through a Crown corporation and two private insurers instead of a federal veterans program.
A lawyer handles the premium and the PST on it as part of closing, alongside legal fees that typically run $800 to $1,500, so the buyer sees one combined bill rather than a separate line item labelled as a fee.
None of that changes based on service history, only on down payment size. Get your hand-reviewed valuation from Joel Dyck.