Insurance can be a tricky business and calculating what people pay for insurance is different for every client. You can have virtually that same property as someone else and pay a vastly different amount for insurance than the other person. So how do insurance companies figure out what to charge? Here are just some of the key factors that insurance companies look at to find out.
First is the type of coverage you want. This is very basic but there are a range of coverage types, from full coverage to comprehensive, and everything in between. Then there are basic inclusions and non-basic inclusions. Your coverage type will greatly influence what you end up paying.
Another basic factor is the amount of coverage you opt for. This will affect the premium amount. Insuring your house for $500,000 will cost more than insuring it for $250,000, pretty straight forward. You can also choose to pay less coverage with a higher deductible. This will save money on premiums but will cost you more out of pocket if you need to file a claim.
Insurance companies want to know what your risk profile is. For life insurance, your lifestyle and medical history may be factored in. In the case of homeowner’s insurance there are security and safety features on the home that are assessed. For car insurance there’s your driving record that plays a big part.
How many claims you have filed in the past may have an impact on the price of future coverage. The greater number of claims filed, the greater chance of a rate hike since you are viewed as a high-risk client.
The general market conditions are something that the client has no control over but may influence the price of insurance. For homeowner’s insurance, frequent or recent natural disasters may drive up the price of insurance. For car insurance, an increasing crime rate may cause the rates to increase.
Insurance is a tricky business and requires a good agent to help sort things out.