Monday, May 18, 2009

Insurance premium

What is an Insurance Premium? An insurance premium is the actual amount of money charged by insurance companies for active coverage. An insurance premium for the same service can vary widely among insurance providers, which is why experts strongly recommend getting several quotes before committing to an insurance policy. Insurance agents or brokers will take your basic information and calculate an insurance premium estimate based on your answers and other factors. The lowest quoted price on an insurance premium may be the better bargain, but the level of coverage may also be lower.
The cost of an insurance premium is largely based on statistics, not necessarily on individual habits or history. A 22 year old male seeking car insurance for a sports car can often anticipate a higher insurance premium than a 45 year old woman driving a mid-size sedan. Both may have excellent driving records, but the insurance company considers a younger driver in a faster car to be more at risk for accidents. Therefore, the insurance premium quotes will be noticeably different. In general, a more expensive or faster car will cost more to insure, simply because owners of those vehicles TEND to drive faster.
The same philosophy holds true for medical insurance premium costs. Non-smokers statistically live healthier lives than smokers, for example. Construction workers may have more serious on-the-job accidents than accountants. A 55 year old lumberjack who smokes may be charged a higher health insurance premium than a 30 year old non-smoker working in an office. Conversely, an insurance premium may be reduced if the policy holder changes his or her habits and lifestyle.
An insurance premium is generally collected in monthly or semi-yearly payments. If the policy holder fails to make a scheduled payment, the insurance company can choose to cancel the policy entirely. This is often referred to as a 'lapsed policy'. Either the customer will pay the balance of the insurance premium and become reinstated or the policy will become null and void. Because the billing cycle can be lengthy, it is not unusual for policy holders to forget to make a payment before the policy lapses.
An insurance premium is always in a state of flux. Rates can go up or remain stable between billing cycles. An accident claim can dramatically change the insurance premium rate of the claimant, especially if the accident report shows the policy holder was at fault. Because most states now have a mandatory minimal insurance coverage law for drivers, there may be no other choice but to pay the increased insurance premium or find another company willing to insure a high-risk driver. Insurance agencies are for-profit businesses, so they will make every effort to recoup their losses after a pay-out. Paying an insurance premium may seem like a waste of money, but knowing your expenses will be met after an accident can bring peace of mind. (

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