Even if you work in the insurance industry, grasping how insurance and insurance premiums work can be challenging. From understanding the factors that determine your insurance premiums to get the lowest insurance premiums, there are many moving pieces when it comes to getting adequate protection for your home, car, business, and other valuable items.

Keep scrolling to learn more about the ins and outs of insurance premiums and how they can affect your insurance policies.

What Are Insurance Premiums? 

An insurance policy is something an individual or entity takes out to receive financial protection and reimbursement against losses. An insurance premium is an amount a business (or an individual) pays for policies that provide home, healthcare, auto, or life insurance coverage.

Insurance premiums are usually based on a calculation that considers various information about yourself and/or a business. To get cheaper or more competitive insurance premiums, additional information is used that typically demonstrates that the individual or business is less risky or less likely to claim on their policy. Insurance premiums may be paid monthly, semi-annually, or annually. The cost of an individual or business insurance premium fluctuates depending on the type of coverage a person is looking for and how risky they are.

What Factors Go Into Deciding Your Premiums? 

There are four main ways an insurance service provider determines a person or a business’ premiums:

Personal Information of the Applicant

Where you live, your insurance history, and other factors in your life will be part of the calculation to determine the premium you will pay. Every insurance services provider will use different ranking criteria. If you are considering life insurance, specific risk factors such as your age and any health conditions you have will be considered.

Amount of Coverage and Your Insurance Premium Cost

No matter what type of insurance you plan to purchase, you will always have to pay more money ( a higher premium) for more coverage. There are two significant ways this works for insurance policies. Your coverage can be altered by the dollar value of whatever you are insuring. For example, insuring a car worth $30,000 will be more expensive than a car that is $80,000. The second way is to take a policy with a higher deductible. For example, you can save 25% on your home insurance premium by increasing your deductible from $500 to $1,000. You can look at different options like higher co-pays or longer waiting periods to reduce your premium for health insurance or supplemental health policies.

Type of Coverage

Insurance service providers have different options when you purchase a policy with them. It makes sense then that the more coverage you get, or the more comprehensive it is, the higher your premium may be. For example, buying all-risk coverage for your home will be more expensive than buying particular insurance for a named peril, like flood insurance.

Competition in the Insurance Industry and Target Area

Sometimes, an insurance company will actively pursue one segment of the insurance industry. To attract as much business as possible, the company will then lower its rates. Unfortunately, there’s no way to predict which insurance companies will target what segment when. However, if you are monitoring a few insurance providers, you may be able to get a great rate just by waiting for an opportune moment.

Do you need insurance for your business, car, or home but don’t know where to begin? At Dunham Insurance, no matter what type of insurance coverage you need, we take the extra time to ensure that you completely understand your coverage and that it fits your needs perfectly. Contact us today to get a free quote!