October 09, 2023
Why do you pay more for insurance than your friend or neighbor, even if it’s the same coverage? Numerous factors affect how much your insurance premiums are, and some are beyond your control.
Insurance is a contractual agreement between an individual and an insurance company. The person, or insured, pays money known as a premium to the company, or insurer. If there’s a loss that’s covered by the insurance policy, the insurer pays the insured a claim amount.
An insurance premium is the amount you pay an insurance company for coverage. It guarantees that you’ll be compensated if you make a valid claim for losses or damages, like your dented car after someone rear-ends you or a broken water pipe in your home.
Whether it’s a monthly, quarterly or annual fee, if you don’t pay the premium, you’re not covered by the policy. It’s like having a membership that you don’t use every day — but it’s absolutely priceless if something goes wrong.
Someone once said, “You pays your money and you takes your chances” in regards to risky investments. In the case of insurance, you pay your money so you don’t have to take a chance.
When you make regular premium payments to your insurance plan, you’re keeping it active so you have coverage in case of an accident or emergency. Insurance companies use your premium payments to cover claims, make investments, or pay for their operating expenses. Like many things in life, it’s a value-for-value exchange, or quid pro quo.
Several things influence the price you pay for your premium, but most of them boil down to either the amount of coverage or your risk level. If you’re more likely to file a claim, you’ll pay a higher premium. Those risk factors differ by the type of insurance.
Your premiums will be based on your age, driving history, and where you live, among other things.
Your home’s location and cost to rebuild are the biggest factors in homeowners insurance premiums.
Healthcare laws are strict, so there are only five factors that affect your healthcare premiums.
Similar parameters also affect life insurance premiums, because the healthier you are the less likely you are to die.
There are always ways to lower your insurance premiums, and the most obvious is to take less coverage. But there are other tips you can follow as well.
Insurance premiums are calculated based on a lot of factors, including the economy as a whole. But beyond that, you’ll pay more if you’re a bigger risk or opt for better coverage. Some risk factors you can’t control, but others — like healthy habits, driving practices and credit score — you can. You also have the option to choose less coverage or higher deductibles in order to lower your premiums.
If you’d like to compare rates on auto, home, renters or condo insurance, find out the best options from over 40 top insurance companies in just a few clicks at Credit One Insurance.
For over a quarter of a century, Heather has been working as a journalist in all media: TV, radio, print, and online. After establishing her career in Toronto, she has been living, working, and playing in Las Vegas for the past decade. She loves pulling apart complicated topics to make them simple, fun, and easy to understand, especially in the business and financial niches. But she also enjoys writing about the personal side of life, including success, relationships, families, and pets. She approaches everything from a yin-yang perspective, so her passion for wordplay and entertaining metaphors is always balanced with an intense (and some would say annoying) focus on facts and accuracy.
This material is for informational purposes only and is not intended to replace the advice of a qualified tax advisor, attorney or financial advisor. Readers should consult with their own tax advisor, attorney or financial advisor with regard to their personal situations.
Credit One Insurance Agency, LLC’s services are not available in all states.
When looking at insurance options, you’ll come across a lot of complicated words you might not be familiar with. Here’s a breakdown of some common insurance terms you need to know before signing a policy.
If you want to provide for your family after you pass away, life insurance is a must. Here’s what you need to know about it and how to choose the best options for you.
Having adequate insurance coverage can preserve your financial health by helping to cover the costs associated with some of life’s most expensive events, including illness, injury, theft, property damage, and more. But you’ll want to have the right types of coverage and appropriate coverage limits. Otherwise, you could be responsible for expenses you didn’t expect to pay for.