Insurance is something we’ve all heard about, and we don’t realize how valuable and necessary it is until we find ourselves in a situation where having an insurance cover could have saved us a great deal of loss. Seeking insurance protection against risks to your life, property, vehicle, and your income is essential. And if you’re interested in getting an insurance cover, one of the first things you need to look into is the insurance premium being charged. In some cases, they may be exorbitantly high.
What Is Insurance?
Insurance is essentially a method of risk management that protects a person from financial losses. There are typically two parties involved in such a deal. The person who offers the insurance cover is the insurer, also known as the insurance carrier or the insurance company. The person who obtains the cover is the insured, also known as the policyholder.
The loss that the insurer protects the insured from may or may not be financial in nature. It is, however, necessary that the loss should be capable of being financially quantified. Insurance generally involves a contract that lists out the circumstances and the terms and conditions under which the insurer will compensate the insured for the losses suffered by the latter. There are several kinds of insurance, which can, on the whole, be grouped into two main categories: property and casualty insurance, and life and health insurance. Let’s look into the details of some of the different kinds of insurance covers available.
The subject insured under a life insurance policy is the life of the individual. At the time of the death of the individual, or upon the expiry of a certain predetermined period, whichever occurs earlier, the insurer pays the insured (or their nominees, in the case of death of the individual) a fixed amount.
Property insurance covers offer protection to the property of the insured, against risks like fire, theft, and damage due to weather or natural calamities. It is a broad category that includes several other kinds of insurance covers such as earthquake insurance, flood insurance, home insurance, fidelity bonds, and even crop insurance, among others.
Fire insurance is a kind of property insurance that offers protective cover in the event of fires. Business premises, vehicles, homes, and even other kinds of public or private property can be insured against the risk of fire. This kind of insurance helps to compensate for the losses suffered by the individual and by the society in the event of a fire.
This is another broad category of insurance that essentially deals with offering cover for legal claims made against the insured party. An example of this would be a homeowner’s liability insurance cover, which offers protection against claims made by someone who suffers an accident on the property. Other kinds of liability insurance includes professional liability insurance, errors and omissions insurance, and public or general liability cover.
Also known as vehicle insurance, this kind of cover ensures the policyholder against any financial losses they may suffer when their vehicle is involved in an accident or is stolen. Coverage under these plans includes property coverage (for damage to or loss of the vehicle), medical coverage (for treating injuries or compensating for lost wages), and liability coverage.
Income Protection Insurance
Income protection enacts when a policyholder becomes incapable of working and earning on account of reasons like injury or a debilitating illness. These policies offer assistance to meet monthly expenses like mortgages and credit card bills, and they can be availed for the short term or the long term. Short-term policies extend for up to six months, while long-term policies extend for longer periods.
These policies were designed to provide assistance to the weaker sections of society where people are unable to pay the insurance premium necessary to avail insurance cover. It is a government-sponsored insurance program that payments cover people based on their needs, as opposed to their contribution.
What Are Insurance Premiums?
An insurance premium is a term that refers to the amount that the insured party needs to pay the insurer in order to avail the benefits of the insurance coverage. From the perspective of the insured, an insurance premium is an expense. As for the insurance company, an insurance premium is an income, and once it is earned, it also represents a liability since the insurer needs to offer coverage for claims being made against the policy for which the insurance premium is paid. Insurance premiums can be onetime fees, or they can be charged annually, semi-annually, quarterly, or even monthly.
5 Things To Keep In Mind For Low Insurance Premiums
Insurance premiums can be expensive, especially if you don’t do the necessary research before obtaining an insurance cover from a provider. However, with a little bit of caution and with some effort on your part, you can get your insurance premium lowered by a considerable amount. The effort and the measure adopted to lower your premium depends on the kind of insurance involved. Here are some ideas that can help.
Compare Your Options
When you go about seeking an insurance cover, potential insurance providers look into your records and weigh your credibility. In the same manner, you should be checking out the various options you have. Instead of going for the first insurance company you come across, compare several options and analyze the insurance premium you’ll have to pay under the plans offered by different insurance service providers.
There are several websites and online tools that can help you make this comparison. They work pretty much like the sites that help you compare the prices of flights or the cost of different commodities like cell phones or other gadgets. Even if you don’t decide on an insurance provider right away, comparing your options will give you a fair idea of how the insurance premium rates stand in the market.
Clean Up Your Record
It’s a known fact that the premium you’ll be charged increases with the risk you present. For instance, if you’re seeking a cover on your life, habits like smoking or drinking can drive the premium upward. This is because these lifestyle choices increase the risk of you falling terminally ill. Similarly, for auto insurance plans, insurance providers often look up your driving records to get an idea of the kind of driver that you are.
If you’ve taken a course in defensive driving, and if you have relatively fewer tickets in your name, you stand a greater chance of getting a lower insurance premium. So, clean up your record, and make an effort to look good on paper. Checking all the right boxes can go a long way in ensuring that you get lower premiums for your insurance plan.
Fish For Discounts
More often than not, people seeking insurance take the premium they are charged at face value, without enquiring about any discounts or offers available. If you’re ever looking to get an insurance, remember not to make the same mistake. Insurers offer several kinds of discounts, and you’ll never know until you ask.
For example, you could take a bundled insurance plan by clubbing your car insurance with your homeowners’ cover, if you’ve got one. Or, you could include multiple cars under the same policy. This way, you can pay the insurance premium for one comprehensive plan instead of shelling out funds to meet the premium on multiple covers. Some insurance companies also offer discounted the premiums for members of certain professional organizations or affiliate groups.
Look Beyond The Commercials
An insurance company may seem perfect on paper. The commercials will all tell you that the insurer offers coverage at a premium that is as low as it gets. But in truth, no insurer can offer the best rate for all the people who seek coverage under their schemes. The best plan and the best provider varies from person to person.
A plan that’s expensive for one person may be the best one for another, depending on individual factors like health, credit score, location, and driving records. So, look at different options and work out how they impact your specific case. Also, remember to look past the big players and consider the local and regional insurers, who may sometimes turn out to be the better option for you. Not only do the smaller insurance providers offer lower premiums, but they also achieve higher customer satisfaction.
Improve Your Credit Score
Your credit score doesn’t only play a role in determining whether you’re sanctioned a loan; it also has a substantial impact in the level of insurance premium that you are charged. While some states do not allow insurers to consider credit score, most insurers in other states include your credit score as an important factor in weighing your risk and determining the rate of the premium to charge you.
So, in order to ensure that your credit score doesn’t negatively impact your insurance premium, pay all your bills on time, and do not stretch out any expense that is due past the deadline. Also, go through your credit reports and spot any errors that may have been made on them. It’s crucial to ensure that your credit reports are factually correct, so you stand a better chance of enjoying a lower premium.
Bear in mind that not paying your insurance premium on time can adversely impact the claim you can make against your insurance cover. So, once you get a premium that’s at an affordable level, ensure that you pay it on time to avail the benefits of your policy entirely. Defaulting can not only result in loss of cover, but it would also mean that all the premium payments you made till the point of default would be in vain.