How are Insurance Premiums Decided?
Ever wonder why one person has better insurance premiums over another? Insurance premiums are decided by an insurance company based on your risk level. And Insurance premiums for services can differ from company to company, which is why it's wise to shop around for the best rates. Depending on the type of insurance you are seeking, there are different factors that the insurance companies will look for in relation to your life history, age, and health. To better understand how it works, here’s a look at how insurance premiums are decided and some of the most common factors that are used to determine your rate.
For all insurance types, age will matter. And in most cases, if you’re over 65 or are young and inexperienced, it’s likely that you will be offered a higher premium. In regards to home insurance, newer homes tend to have lower premiums. This is mostly because the materials can be easily sourced in case of damage that requires you to rebuild the home.
Your overall health and the 'health' of your home also will be considered. In the case that you have a condition or disease that puts you at risk, then your premiums will be increased. This also includes the health of your home - older homes often contain outdated and unique architectural features that would be costly to replace.
Where you live may also be taken into consideration. For home insurance, if your neighbourhood is at risk to hurricanes, tornadoes, or sinkholes, for example, you will likely have a higher premium. The same goes for car insurance if your area is densely populated or prone to theft and vandalism.
If you have claimed a mishap before, it could raise your insurance premiums. On the other hand, if you’ve held a good track record, your insurer may reward you with lower rates.
As a rule of thumb, the more protection you need, the higher the premium. So if you need to put a number of coverages on your home or car, you’ll likely pay more than someone who only needs one.
A good credit report can also impact how your home insurance premiums are decided. You’re likely to get a better premium if your credit rating is in good shape than if you have a lower score.
What you do for a living also matters. For instance, if you’re applying for car insurance and you’re on the road constantly for work, your premiums will likely be higher. If you have a degree, you’re likely to get lower premiums on a home than someone who only has completed high school.
Depending on the insurance and provider, there may be other factors that are put in place to determine what kind of insurance premiums you will get. At MLS Insurance, we will help you find the best insurance provider for your needs. Contact us today!