Insurance risk: 4 factors and its effect on premium rates
Insurance risk: 4 factors and its effect on premium rates
When you want to purchase different types of insurance policies, the insurance companies will assess the insurance risk. In other words, the companies will consider certain factors to determine how likely you are to file claims and accordingly decide whether or not they should offer you a policy. They also use the insurance risk factors to set your premium rate. If they consider you as high risk, you will be charged a higher rate.
Insurance companies consider various insurance risk factors before providing you with a policy. A sound knowledge of these factors can help you have some idea of whether or not you can purchase a policy and how much you may have to pay for it. Some of the factors are:
When you want to insure your car or obtain insurance policies like health and life, the insurance providers will consider your age to determine your premium rate. If you are under the age of 25 years, you will have to pay more for insuring your car as insurers believe that younger people are more likely to cause an accident. On the other hand, the older you get, the higher amount you have to pay as premiums for your life and health policy. This is because you become more susceptible to suffer from illnesses with age.
The place where you stay also plays a decisive role in determining your premium rates. If your house is in an area that is prone to earth quakes or other natural hazards, you will be charged a higher premium rate for insuring your home. If your locality has witnessed a number of cars being stolen in the recent past, insurance companies will charge you more for your auto policy. You will also have to pay more for your car insurance if your residing area is congested. This is because more traffic tend to cause more accidents.
If your profession requires you to travel a long distance, you will have to pay more for your auto insurance policy. If you are involved in a profession that is hazardous, the insurance companies will charge you a higher premium rate for your health policy. If there is life risk involved in your job, there is a high possibility of you being denied of life insurance.
In case of life and health insurance, your medical history and health habits are the main factors that insurance providers consider while assessing insurance risk. Whether or not you will get a life and health policy and how much will be your premium amount depends on this factor. If you suffer from chronic disease or terminal illness, almost all the companies will deny you a life insurance policy. You will be charged a high premium rate for your health policy if you are a smoker.
There may be other risk factors as well. For homeowners insurance, the type and quality of the material that has been used to construct your house are also risk factors. However, all insurance providers do not use the same insurance risk factors to assess the risk they take take by offering you a policy. So, if you’re denied a policy by a particular provider, you should not lose hope. If you shop around properly, you may come across a company that will provide you with the type of insurance you desire.
