As we have been looking at what an insurance policy is and what some of the terminology is, we certainly have to talk about the term “premium”. Now, I think that’s it’s a pretty safe bet that everyone or almost everyone knows what the premium is, which of course is the amount that you must pay each month for your coverage. So instead, I thought we’d look at how premiums are determined.
Once the insurance contract has been entered into, the insured party now has the responsibility to pay the insurance premium. Failure to continue to pay your premium on time can mean that you can lose your insurance coverage, along with all of the money that you have already paid into it.
As we have discussed previously, various insurance companies offer different premium rates, depending upon the policy and the protection offered to the insured. Often times, the premiums can be different, between companies, for the exact same coverage!
A person who wants to get insurance, of any kind, whether car, home, life, etc, should consult an independent insurance agent, who contracts with several insurance companies, which allows you to decide whom among them can offer you the best benefits for the least premium cost.
In auto insurance, the considerations for the amount of premium paid is based on a number of factors; including the age and sex of the person, their hobbies, their occupation, their driving record, the vehicle mileage and several other factors.
So, the premium for a 20-something male, getting an insurance policy for his sports car, would be more expensive when compared to the premium on the sedan of a 40-year old male. The premium for auto insurance is based on a number of statistics and in this case, the insurance company has a bias against a young man who may be considered an insurance risk, because of the common belief that men his age drive faster. Like it or not, that’s just how it is.
In considering the cost of life and disability insurances, great value is placed on things like the person’s age, sex, occupation, hobbies and any other risk factors. Therefore, the premium for life insurance would be more expensive for those who are considered to be insurance risks, such as people who work in hazardous occupations or people who smoke. Some companies will also do research on your background, where you live, your family history and other factors that may make you a big insurance risk.
An insurance premium can be paid by the insured on a monthly, quarterly, semi- annual or annual basis, depending upon his preference. Paying an insurance premium on an annual basis can be less expensive than paying it on a monthly basis; however, an annual payment can be a big hit to one’s finances, due to its cost.
Before getting your insurance policy set up, you’ll want to make sure that you know for sure which payment method will be the best for you. If you’ll remember an earlier discussion, failure to pay an insurance policy can cause it to lapse or to be cancelled.
Unfortunately, there are insurance agents out there, who are less than reputable and often times ignore their clients, once they have earned their commissions. Because of this, the insured person often forgets the due date of their payment, until they receive the notice that the insurance has already lapsed. It may seem hard to believe, but even today this kind of thing happens.
It can also be another story when the time comes for the insured to collect what the insurance company owes him/her. Since these insurance companies are business entities, operating for profit, there are those few who try to look for causes or faults, on the part of the insured, so that they can avoid paying the benefit amount owed to the policy holder.
Getting involved in a messy insurance claim can be psychologically traumatic for both the insured and his beneficiaries. Sometimes, people even think that the benefit one gets from having insurance coverage is not worth the possible headaches that can be brought about by an unscrupulous insurance company.
This is just another example of a few bad seeds spoiling the whole crop, though it is another good reason to seek the advice of your professional independent insurance agent. Remember he/she works for you and not for some particular insurance company. They don’t want you to get cheated any more than you do!