When an individual or organization shows interest in getting insured, the insurance company comes up with an insurance policy and proposes a stipulated amount that will be paid periodically; this payment is termed the insurance premium, which differs from one person to another. Likewise, the factors to be considered are pretty much endless.
What Exactly is an insurance premium?
Receiving insurance coverage whether as an individual or group comes at a price and it is referred to as an insurance premium which is been collected by the insurance company.
Not every insured get into financial losses across the stipulated time when the insurance premium is been paid. Therefore, the money collected from all insured in form of premiums is in excesses since only a fragment ends up in financial losses as established in the contract agreement between the insured and the insurer. As an avenue for more money generation, the insurance company tends to invest the premium collected.
Premium payment differs from one insurance company to another and they come with payment packages that could be monthly, semi-annually, or annually and sometimes a huge deposit must be made before the insurance coverage begins. The tendency of financial loss to happen affects the payment cost.
How to Calculate Insurance Premiums?
Investing in insurance policies is one of the important financial decision one should take. For instance, partaking in life insurance makes you present financially even after death. before partaking in an insurance policy specifying your desired requirement is paramount to knowing what you are paying for.
Regarding life insurance premiums, they are put in place to make the policy in force. Determining such a premium requires assessing several factors which are relative to the insured life. A lifestyle that can increase possible risk of life makes the premium high whereas certain lifestyle comes with a discount.
Age: is an important factor to consider as purchasing life insurance at a much younger age is less expensive than at a higher age. Insurance firms put age as a key factor when establishing an amount.
Gender: a factor in establishing an insurance premium amount is due to research pointing out that at least women tend to live five years more compared to men. This makes it a privilege to be enjoyed by women.
Habit: can also influence insurance premiums, smoking, and also drinking which makes one’s health vulnerable and at high risk of ailments and can put the tip at high a high price.
Also, the medical record: which holds the record of previous health issues goes a long way in outlining the insurance premium. Genetic medical histories such as cancer and other diseases are highly influential.
Occupation: which comes with hazards such as mining, oil sector, or armed forces pay a high amount in insurance premium because the nature of work determines the risk level.
Lifestyle and social choice: is a huge determinants, those involved in sky diving, mountain biking, etc. tend to pay a higher amount in premium due to the life-risking venture.
Types of Insurance Premiums
Various insurance policies come with various insurance premiums to be paid, this includes:
Life: Personal information such as age, health, and medical history also considering whether the person smokes or drinks alcohol will go a long way in determining the premium.
Health: Employers can cover the health insurance of employees so in that scenario, they may not need to pay premiums. In the absence of employer’s insurance coverage that means one needs to cover them by paying personally. When paying personally, the high the amount paid in form of an insurance premium the lower the number of medical expenses one needs to pay from pocket.
Auto: History of violation or a previous number of parking tickets and other driving records such as license suspension or accident are among the necessary checks needed to be carried out when purchasing auto insurance. The cleaner the records the lesser the premium amount to be paid.
Homeowners: homes located in areas with higher chances of weather-related issues such as tornadoes or hurricane pays a higher amount in premium. Apart from location, the age and size and also valuation.
Renter: In this category credit scores matters and also location and number of insurance claims you had in the past determine the amount of coverage and deductible amount due.
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