Factors That Affect The Cost Of Your Insurance Premiums

The cost of your insurance premiums will vary depending on how risky your insurer thinks you are. Generally, the higher the risk perception that an insurer has, the higher the premiums you will pay. Therefore, anything that can increase the odds of the thing you are trying to insure against is likely to increase your insurance premiums.

The following are the most common factors that affect the cost of insurance premiums.

Deductibles

An easy way to pay lower premiums is to choose a higher deductible. This is the amount you choose to pay out of your pocket before insurance coverage takes place. And so, if you opt to pay a higher amount of money before the insurer can start covering your costs, you will effectively reduce the insurer’s risk exposure. Therefore, your insurance company is likely to require lower premiums from you.

While choosing a higher deductible always leads to lower insurance premium costs, it can land you in trouble. If the deductible cost ends up being too high, you may have to shoulder a significant portion of the expenses in case of a claim. And if you can’t afford this amount, you may receive only some of the financial help you need in case of a claim.

Age

Age plays a significant role in determining insurance premiums primarily because of the risks of old age. Generally, the older one is, the more the cost of insurance premiums.

First, the older you are, the closer you get to your life expectancy. Therefore, the chances of dying increase with every birthday you have. To an insurance company, this means a higher risk of a claim, so they tend to require higher premiums to cover the increased risk.

Another reason insurers factor age when calculating health insurance premiums is that older people require more care. They are more susceptible to heart disease, cataracts, hearing loss, diabetes, arthritis, and high blood pressure. Therefore, an insurer is likely to consider you to carry a higher risk if you are older. As a result, they will charge you higher premiums when compared to someone significantly younger than you.

However, when it comes to car insurance, insurers tend to charge younger drivers more. They often relate age to the driving experience of an insured person. To them, younger drivers are typically less experienced. They are also more likely to be reckless. And given that studies show that these drivers are four times more likely to get into an accident, their assumptions are usually justified.

Unfortunately, the benefit of lower premiums does not extend to drivers above age 60. Anyone in their 60s tends to be charged higher rates than the average 30-year-od. The reason is that insurance companies account for the risk of slower reflexes that someone over 60 may experience.

Medical history

Your family’s medical history can affect the cost of your insurance premiums. It is often a factor in instances where there is evidence that a given disease runs in the family. For example, if your family has a history of heart disease or kidney disease, the insurer can conclude that the odds of you getting the disease are higher.

To the insurer, this means there is a good chance they may have to foot your hospital bill in the future. And to account for the increased risk and minimize the potential loss they may suffer, they will charge you a higher premium.

Another way your medical history can affect insurance premium costs is in relation to pre-existing conditions. If you have a serious pre-existing medical condition, you typically carry a higher risk of developing further complications. You are also more likely to die. These are things that an insurer will consider when calculating your premiums, and chances are that they will increase them.

To reduce their exposure, insurers usually ask for a medical exam. They require details concerning your blood pressure, weight, height, cholesterol levels, and heart health. And if any of these results indicate an increased risk of your health being compromised, they will charge you a higher rate.

Lifestyle

If you live a healthy lifestyle, you are likely to pay lower insurance premiums compared to another person who does not live a healthy lifestyle. For example, if you don’t smoke, your premiums will be lower than those of your frequent smoker friend. The same applies to drinking and other unhealthy habits.

People with unhealthy lifestyle choices tend to pay higher health insurance premiums because they are more likely to get ill. Therefore, to an insurer, they are a riskier investment. The insurer will thus charge them higher premiums to offset the increased risk.

Your hobbies and occupation can also affect the cost of your insurance. Generally, you will pay higher premiums if you work in a hazardous environment. The same is true if you routinely skydive or drive race cars. These activities are risky, so your insurer will account for the increased risk they carry by charging you higher premiums.

Therefore, it is a good idea to consider changing your lifestyle before applying for insurance coverage. It may mean quitting smoking or drinking a few years before shopping for insurance. It may also mean switching your hobbies from risky ones. Doing so will have a significant impact on the premium rates that your insurer will charge you.

Driving record

Insurers will typically ask about your driving record. They will even access your DMV records to verify if you have any violations. And if they find that you have a bad driving history, they will increase the cost of your premiums. From your record, they will conclude that you are likely to incur more violations, increasing the chances of them having to fulfill a claim. Therefore, they will charge you higher premiums to reduce their risk exposure.

Generally, your insurer will consider you a high-risk client if you have a history of DUI convictions, accidents, and traffic violations. As a result, they will charge you higher premiums — when compared to a person with a violation-free driving record. This is one of the main reasons why it is vital to have a Houston car accident lawyer on speed dial in case you get in a car accident, as they may help to keep your record clean.

However, you should note that not all violations are the same. Some carry more weight than others. For example, if you have multiple DUI violations, you are typically at a higher risk of getting into an accident than someone with a few parking tickets. Also, violations that happened over five years ago will have a different weight than violations that occur within a year of applying for insurance coverage.

Policy type

The type of insurance policy you settle for will also significantly affect the cost of your insurance premiums. Your policy type matters because different policies expose an insurer to different levels of risk. They also carry varying degrees of benefits.

For example, if you choose a term life insurance policy, you will pay lower premiums than those who opt for a permanent life insurance policy cover. Your premiums will be lower because term life insurance policies cover a limited period. This means that they offer limited risk exposure to the insurer. On the other hand, permanent life insurance policies don’t have a time limit, so they carry a higher risk. Therefore, they often attract higher premium charges.

Another example where the type of policy determines insurance premium costs is when it comes to group policies and individual policies. Generally, individual policies attract higher premiums than group policies. Therefore, to lower your insurance costs, opting for your employer’s group policy instead of an individual one is a great idea.

Location

Your location is also a factor that can affect the cost of your insurance premiums.

For example, your premiums will go up if you live in an area with higher crime rates. To an insurer, if your area experiences high rates of vandalism or theft, there is a higher chance that criminals may also steal and vandalize your property. Therefore, you present a higher risk of loss to them. As a result, they are likely to apply higher premium rates to your policy.

Living in an urban area can also increase your car insurance costs. When assessing your policy’s risk factor, an insurer will consider that you live in a place with more intersections and cars. Therefore, the odds of you getting in an accident when living in an urban area is higher when compared to a rural area. Consequently, they will charge you higher premiums than those living in rural areas.

Therefore, you can reduce your insurance premium costs by changing locations. Moving to an area with lower crime rates and less traffic will help. And so will relocating to a place that has lower risks of experiencing flooding, wildfires, and other natural disasters.

These are the main factors that affect the cost of your insurance premium. However, they don’t affect your premiums equally. Some factors carry more weight than others, and this is something that varies from insurer to insurer — which is why you should always shop around when looking for an insurance partner.

Contact a lawyer

Even if you have a valid policy and have paid your premiums faithfully, an insurer can still try to wiggle out of their obligation to release your compensation. Therefore, before filing a claim, you should contact a Houston car accident lawyer today to find out the best way to guarantee that you protect your right to compensation.