Life is a beautiful adventure with its fair share of ups & downs. The downs can strike unannounced in the form of diseases, accidents, property damage, or even a global pandemic. While it's difficult to foresee these events and plan ahead, an insurance policy can protect you and your loved ones. It mitigates the financial impact of such instances and cushions your family when they need it the most.
But the fundamental of insurance requires paying a premium from time to time. So, if you are wondering what is an insurance premium, don’t worry. Read along to clear all your concepts.
What is an Insurance Premium?
The insurance premium is the total amount an individual or business needs to pay to get the benefits of an insurance policy.
Most insurance companies will offer several options for paying insurance such as monthly installments, semi-annual payments or even paying the total amount upfront.
Now that you know what is a premium, let’s take a look at the factors that affect the premium amount.
Factors Affecting Insurance Premium Amount
When dealing with general insurance
, there can be several factors that affect the amount you may have to pay for your premium to get the benefits.
Most policy-holders buy insurance with the mindset ‘What is a premium compared to the sum assured?’, and this often causes them to end up with higher premiums. It’s good to buy policies after knowing what exactly you are being charged for. The table given below explains these factors concisely:
How Do Insurance Companies Calculate Premiums?
||Type of General Insurance
|Mode of Premium Payment
||Upfront payments cost less than monthly or quarterly plans
|Mode of Policy Purchase
||Buying policies offline can cost more since they include the commission of the employees
||Your profession can affect the cost of your premium as professions with higher risks increase the chances of you claiming the benefits
||With a higher age comes a higher risk of falling sick with fatal diseases, and as a result, you may have to pay a higher premium
|Smoking and Drinking
||Habits that can harm your health are bound to increase your premium amount
||If you have a history of rash driving or DUI, this can cause a significant increase in your insurance premiums
||Homeowners in earthquake-prone zones often are charged higher premiums than those who are in safer regions
When buying insurance, one of the first questions to ask is what is the insurance premium amount. Before availing your policy, insurance companies employ various examination methods to check the above-mentioned factors calculate the probability of a claim being made.
If the likelihood of a claim is high, then the company will charge a higher premium for the insurance, and vice versa.
Types of Insurance Premiums
Here are the different types of insurance premiums that you can opt for while purchasing any general insurance policy.
How to Save Money on Insurance Premiums
||Type of Insurance Premium
||Life Insurance Premium
|Health Insurance Premium
|Travel Insurance Premium
|Car Insurance Premium
|Mode of Payment
Now that you know what is a premium calculation mode, you can use this knowledge to get lower premiums in your insurances. Here are some of the best ways to score lower premiums on your insurance policies:
Impulsive Decisions Aren’t Your Friends
Impulsive shopping can cause you to pay a higher premium than needed. It is always a good idea to check around with other providers and compare prices before buying a policy.
Buy the Policy Directly
When you ask an agent ‘what is the insurance premium amount’, you won’t be given the actual premium amount, but rather an amount that includes his commission.
Stick with One Provider
Most modern providers offer all insurance policies which makes it possible to get all your policies from the same provider. This can help you score discounts on future policy purchases.
Pick a highly rated insurance company
“What is the insurance premium I have to pay”
- Sure, this is the first question that might come to your mind while you shop around and compare the insurance companies but cheap isn’t good here. Always, go with a reputed and highly rated company (that scored high from independent agencies). After all, it’s your money!
Avoid Small Claims
Making frequent claims on your insurance can remove your No Claim Bonus, and also result in higher premiums for future insurance policies.
Now that you know what is an insurance premium and the factors is affecting it, you can pick the insurance provider that gives you maximum benefits with an insurance premium best suited to your pocket.