When you opt in to buy insurance, you will come across several terms involved in the process. One such term is insurance premium.Today, we will take a look at what is insurance premium and understand the factors that are considered in its calculation.Insurance premium meaning
Insurance premium is the amount of money that you pay to the for the coverage that they offer you. Different insurance products will have different premium rates based on the type and extent of coverage. However, there are many more factors that go into determining the value of the premium you end up paying. In fact, two policyholders may be charged different premiums for exactly the same amount of coverage.
Let’s look at a few common types of general insurance and see what factors are involved in calculating premiums.Factors that determine insurance premium
When you buy insurance, your insurer will assess the risk involved in covering you with the help of several factors.
Health insurance: Health insurance is one of the most important forms of coverage that we all must have. The main factors that determine your premium for health insurance include age, type of policy, sum insured, existing medical conditions, location, and BMI. Lifestyle habits like smoking also play a huge role in determining the cost of your health insurance premium.
Motor insurance: In motor insurance, you can choose between a standard third–party policy and a comprehensive plan. If you opt for third party insurance, your premium is a standard one set by the IRDAI based on the engine capacity of your vehicle. If you opt for a comprehensive plan, your premium will be based on various factors including type of fuel, geographical location, and number of add–ons.
Home insurance: Your home insurance cost is determined by several factors such as the neighbourhood, type of plan selected, property age, and security measures taken. Like with other types of insurance, your home insurance premium also goes up with each rider that you include.Disclaimer: The above information is indicative in nature. For more details on the risk factor, terms and conditions, please refer to the Sales Brochure and Policy Wordings carefully before concluding a sale.