Insurance Premiums

In the current scenario of uncertainly, insurance is available for just about anything and everything. Insurance is a risk management tool, designed to secure you and your dependents financially, in exchange for a "Premium". Insurance covers the unforeseen losses and potential risks related to your health, vehicles, travel, house, unemployment, investments, liabilities, assets, estate, theft, fire or any risk for inability to earn income at any stage of life.



"Insurance Premium" is the monthly payments to the insurance company against the sum of money the insurance company agrees to pay you to recover the losses, which you may undergo in the occurrence of a mishappening.

Health Insurance
These days, medical care costs much higher. Health care insurance is necessary for every individual to lead a healthy life and to secure you from medical bills incurred because of the sickness, an unforeseen mishap or disability or attack. It is more beneficial for old aged people, who have comparatively more chances of needing payments for their medical bills.

The premium cost is determined by the statistics of the person, seeking for insurance. Say for an example, non-smokers lives healthier lives than smokers, so, the smokers may be charged a higher health insurance premium than the non-smokers. On the other hand, the premium amount may be reduced if the policy holder changes his/her habits and lifestyle. Same goes with the mine workers, who may have more serious on-the-job accidents than the white collars.

Life Insurance
A life insurance is essential for everyone and beneficiary especially for the people who are the sole bread earners of their house or the ones with many dependants on them. In case of any mishap or accident, if your family was to lose you or you get disabled, resulting in a loss of job or inability to work, your family would at least be able to compensate the financial loss.

Some of the factors that influence your premium rate are your age, health, weight, your smoking and/or drinking habits, your nature of job, your medical record and inherited illnesses, your life expectancy etc. For example, smokers/tobacco users pay a higher premium for life insurance; you can save 20% to 30% on premiums if you quit smoking. Similarly, people who are obese pay a higher premium, because of the many health problems that are associated with being overweight. If you want to control the insurance premiums amount, consider changing the habits/things to become healthier like giving up smoking. But there are some factors, which you can not have control like in case of your old age or inherited illness, you are more prone to death. Hence you are charged a higher premium.

Car/Auto Insurance
No matter how safe your driving is, damages, scratches, accidents are common when your vehicle is on road. Auto insurance protects you from the unpredictable damages of your assets like cars, trucks or any other vehicle during traveling.

The factors influencing the amount of auto insurance premium are principally based on statistically-proven risks like driving distance to your job, insurance status, your age, purpose/uses of vehicle, anti-theft devices in your vehicle, your smoking and/or drinking habits, parking place of your vehicle, credit history in case your vehicle is on finance, your driving experience, cost & model of the vehicle, your area of residing (metro/urban/rural… like in metros, frequency of accidents and vehicle theft is more), annual miles driven, driving violations, accident history etc. The more risk associated to your vehicle, the higher the car insurance premium. A young age male, seeking insurance for his sports car can often expect a higher insurance premium than a 50 year old lady driving her Skoda Laura. Though, both drivers may have first-rate driving records, but the insurance company considers a younger driver in a speedy sports car to be more at risk for accidents than the old lady because the sports car is tend to drive fast, moreover, the young population is more likely to be in an accident than the old age drivers.

Travel Insurance
This insurance covers any financial or other losses such as medical expenses, travel delay, loss of personal belongings, personal or third party liabilities, death, personal accident, repatriation etc., which you might face while traveling overseas or domestic. This type of insurance is useful for those who travel abroad frequently, mountain trekkers, cruise travelers etc.

The premium amount is based on a number of factors such as your age, destination(s), the duration of your trip, your risk profile, your purpose of traveling, length of journey etc. The higher the risk, the higher will be the premium. The amount of premium would be higher if you are going to Nepal to conquer Mt. Everest than the amount of premium for traveling to US for a business purpose.

Dental Insurances
Dental insurance is the insurance, designed to pay a portion of the costs, which you have to bear in order to cover the expenses associated with dental care. Dental insurance can be for an individual, a group or for a company.

Mortgage Insurance
There are two types of mortagage insurance with quite different purpose and beneficiary.

Mortgage insurance is an insurance policy which compensates some or most of the losses of mortgage loan to the lenders, due to the default of a mortgage loan. This type of insurance is required primarily for borrowers with a down payment of less than 20% of the home's purchase price.

Mortgage Life Insurance refers to an insurance policy that guarantees repayment of a mortgage loan in the event of death or disability of the person who borrowed the mortgage. Its purpose is to pay off the mortgage and leave the family with a mortgage free home. This is comparatively a less expensive than other forms of life insurance because the death benefit decreases as the loan is paid down.

So, one policy protects the lender and the other policy protects the borrower.

Factors that decide the amount of premium are the income of the borrower, credit score of the borrower, the price of the mortgage (property), information about any other debts or liabilities of the borrower etc.