The insurance premium is the actual amount of money that the insurance company charges insured’s for their active coverage.

When it comes to the insurance premium it can vary quite widely between the different insured’s and the insurance companies themselves. For this reason when you’re looking for a policy it is wise to get several quotes so you can compare rates and services within the policy.

The insurance agent or the insurance broker will take all of your basic information and then calculate your premium based upon both your answers and other factors. Please keep in mind that these are simply estimates. Before your policy is in force it goes to an insurance underwriter who signs off on the final policy in terms of coverage and premium after a risk assessment. You should take a look at the lowest quoted price as while it might be the best in terms of price it might not be so good on the level of coverage and may be missing some of the essential coverage options that are important to you.

Premium Calculations: Auto and Health Insurance Examples

The cost of an auto insurance premium is based upon several factors; such as, statistics and your individual history. For instance, if you’re a young man driving a red sports car you can expect to pay more in premium than an older female driving a sedan.

Regardless of whether or not driving records are excelling and there have never been any accidents there are a couple of reasons that the policy is going to be higher:

1. Being a younger driver in a faster car is more of a risk in terms of accident
2. Higher likelihood of payout on a theft or vandalism claim

With the same thing in mind with the sports car if it is a car that is high on the frequent stolen “lists” you can expect to pay more since you’re an adverse risk to the insurance company; especially when you couple that with the other example.

The same is going to be true within the health insurance industry in terms of premium costs. A young healthy non-smoker is going to get a better rate than an older smoker. Someone who works in a high risk job like construction can expect to pay more than someone that works in an office even if they are the same age and both are in excellent health.

The keyword is risk. The greater a risk you are to an insurance company whether it be auto, health, etc… the higher you’re going to pay in premium. Insurance companies like all others are in the business to make money, so if you’re a high liability risk, or they are more likely to pay out a claim on you than you’re going to pay for that in premium.

Premium Payment Collection

An insurance premium is usually collected in monthly payments though it sometimes can be collected on a semi-yearly or quarterly basis. You need to make sure you pay on time and stay current. Should the policyholder fail to make a scheduled payment the insurance company does have the legal option to cancel your insurance policy completely.

The term for termination for non-payment is referred to as a lapsed policy. The insured is sometimes granted the option to pay the balance owed on the premium in order to regain coverage or the policy completely cancels. The premium payment schedule can be a lengthy one so it’s not necessarily uncommon for someone to miss a payment.

The one thing that you need to make sure of is that you don’t lapse; especially on a health insurance plan if you’re sick or on a lot of expensive medication. At this point you’re costing the insurance company a lot of money current and especially a lot of money in the future. If you stay current they legally can’t cancel your policy; however, should you lapse they have the option of cancelling your policy outright without reinstatement and are likely to do so; simply the nature of the industry.

Final Thought

I don’t think there is anyone that can’t think of a better thing to do with the money we pay in insurance premiums; however, the money is well spent to have the peace of mind knowing that should a serious accident happen your expenses will be met and you’ll be taken care of.

Get insurance, keep your insurance, pay your bill.