The starting point of every insurance premium is largely based on the use of statistics, although the person’s prominent habits and history may pose an influence on the changes made to the premium cost. Here is a simple example: A 23-year old male who seeks coverage for his sports car often anticipates to pay for a higher premium cost than an elderly woman aged 47 who drives on a mid-size personal sedan. Let us assume that both have excellent driving skills and records, but the insurance company will consider the younger driver in a fast car more prone to dangers and accidents as compared to the experienced driver in a slower vehicle; therefore, eventhough both have the same type of insurance policy, the insurance quotes will usually be significantly different from each other. This stipulates to the specificity of the insurance policy.
The same concept of philosophy is applicable for medical insurance premiums – especially when governments don’t provide health care programs to its constituents. People who have health problems, those who engage in unhealthy lifestyle and activities, and those who work in unsafe environments often pay large premiums than those who have stable health status and working on safe workplaces. For example, non-smokers have low risks of acquiring pulmonary diseases (such as tuberculosis) and disorders than smokers, and industrial workers are more prone to dangers than office accountants. Therefore, the former are typically paying large premiums than the latter.
On the other hand, area or location of the policyholder holds a factor to the insurance premium. On automobile insurance, companies that provide the service will basically charge large premiums to cities or regions that statistically show high rates of car accidents and companies will charge relatively lower premiums to places with fewer accidents. As in the case of property insurance, the total cost of the property, its proximity to flood zone areas, and its proximity to natural causes (like storms, earthquakes, tornadoes, and etc.) will all be considered thoroughly, as is the spending capacity of the homeowner to replace any damage. In due to this, the company also has fixing rates control the cost of compensation the homeowner will receive.
The cost of the premium may vary from policy to policy, which is a reason why experts recommend that buyers should determine the insurance quotes of different insurance companies before committing to a certain policy. The most economical choice of a majority of buyers is to decide on a much cheaper insurance policy, but always put it in mind that this may not provide substantial coverage.
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