Insurance Premiums and How They Work

Buying insurance coverage isn’t a negotiation. The industry is highly regulated meaning the insurance carrier controls the costs. The costs are firm, and the only means of reducing the cost of insurance is by reducing the amount of coverage.

Indeed client-specific details, like property characteristics, vehicle, and driving record contributed in determining the final rate charged by your insurance carrier. The truth is that most insurance companies use mass data and the law of large numbers on numerous differing factors to determine insurance pricing. This mass data can be based on age, zip code, financial stability, and even gender among other factors. While it stands to reason that a more accurate determination would be based on an individual’s specific details, there is just no way insurance companies could verify enough reliable information on every insured to calculate an individual rate.

Insurance companies are required to set base rates to be applied per area or zip code. These levels are based upon that area’s proven records of accident/claims frequency, traffic performance, and the number of uninsured motorists amongst many other factors. Client-specific facts (number of accidents or claims, etc.) are calculated into the mix to establish a final rate.

The reality is there are no special discounts that can be applied to policies to decrease insurance cost. Insurance companies have to continually analyze the entire performance of their client base to determine the most competitive rates available. The best approaches clients can take to finding the best insurance available are as followed.

Find a good advisor who works for your best interested. Focus your attention on coverage first, and then address the price. Minimize risk factors that increase insurance pricing (tickets, accidents/claims, lapses in insurance coverage).

Insurance is something that should be purchased to protect your most valuable items, your financial well being, and your family. Finding the cheapest cost of insurance is likely setting yourself up for potential disaster. Learn about your coverage, the company you are with, and the advisor you are working with to net the most gratifying insurance experience.

August 21, 2017
by Jeff Neuhalfen