Your premium is the dollar amount you pay for your insurance coverage. However, many policyholders often wonder why they pay the amount they do. There are several factors that insurance companies take into consideration when calculating your premium. So how is your premium determined?
Understanding Insurance Premiums
You need to know what insurance premium is to understand why your insurance premium is costing you that amount. Your insurance company asks you to pay a premium in exchange for coverage. When you file a claim, funds from that premium are used to help payout those claims so that you can cover the cost of your loss and return to everyday life. Therefore, you might notice an increase in your premium if your insurance company has to pay many claims.
Individual Factors on Premiums
The number of claims isn’t the only factor that will determine your insurance premiums. In fact, you’re responsible for most of your premium’s cost. Here are a few things that can affect your insurance premiums:
Your insurance policy: The more insurance coverage you have, the more your premium. Your Insurance agent can help you find the right blend of deductibles, coverage’s, and premium amount to make protecting what matters to you affordable.
Your record: You will have a higher premium if you’ve filed a lot of insurance claims in the past. In contrast, you’ll likely have a lower insurance premium if you’ve never made a claim. The lower your possibility to file a claim, the likely you’ll get a lower premium.
Other Premium Factors
Unfortunately, some things out of your control can affect your insurance premium. For example, if the rate of inflation changes or if the government introduces new regulations, your premium may be affected.