INSURANCE PREMIUM

An insurance premium is the sum of money an individual or a business unit pays to the insurance company for an insurance policy. These policies cover home, automobile, health, or life insurance. The premiums are paid to get coverage against the loss arising from death, accidents, health issues, natural calamity, etc. The insurance premium must be paid regularly as per the conditions mentioned in the insurance contract i.e, it can be paid monthly, quarterly, half-yearly, or annually. In case of failure of payment of insurance premium, the insurance policy may be canceled by the insurer and the amount of premium paid till the failure of payment may be forfeited by the insurance company and loss of coverage may take place. The amount of insurance premium varies from policy to policy e.g. premium amount of auto insurance will be different from life insurance. Policyholders may choose the premium payment options i.e. monthly, quarterly, half-yearly, or annually installments of premium payments. Many factors may decide the amount of premium to be paid. These factors are as follows:

IN THE CASE OF HOME INSURANCE:

• Coverage limits you choose
• Deductible amounts
• Optional coverages you select
• Your home’s age and condition
• Your claims history
• Your credit rating
• Type of home construction
• Local fire protection

IN THE CASE OF AUTO INSURANCE:

• Your age
• Your driving record
• Type of car you’re insuring
• Age of your car
• Types of coverage you choose
• Insurance coverage limits you select
• Where you live and drive
• How much you drive
• Your credit score

IN THE CASE OF LIFE INSURANCE:

• The amount of life insurance coverage bought
• Type of life insurance policy chosen
• Length of the policy
• Age, health, and life expectancy

INSURANCE DEDUCTIBLE:

Insurance deductibles are the sum of money a policyholder pays out of pocket toward a covered claim.

FOR EXAMPLE:
Suppose a policyholder has taken a policy for a personal car and selected a deductible amount of $200. Later During an accident, he suffered a loss of $ 5,000. If the insured’s claim is covered, he’d pay his $200 deductible toward repairs, and the insurance company would pay the remaining $4,800.
When you reach your deductible, your insurance will assist cover the remaining expenses of your covered claim, up to your policy level.
The insurance company may set deductibles for certain policies in some instances. In some situations, you may have the option of choosing your own deductible. By selecting greater deductibles, you may be able to save money on premiums. The larger your deductible, the lower your premium will be in general. For example, if you choose a $1,000 deductible on your auto coverage, your rates will likely be lower than if you chose a $250 deductible.

INSURANCE LIMIT

The maximum amount an insurer will pay toward a covered claim is defined as an insurance limit. Your premium may be more if your coverage limit is higher. Limits are frequently applied to various types of coverage within a policy. For example:
Homeowners insurance: When deciding on your homeowners’ insurance coverage limitations, you’ll want to consider a few things. These may include the following:

• At current construction costs, how much it might cost to rebuild your home (dwelling coverage)
• The worth of the insurer’s possessions (personal property coverage)
• The amount of liability coverage that may be available to you if you’re held legally liable for a guest’s injuries or property damage.

AUTOMOBILE INSURANCE:

Different types of coverage have separate limits in most auto insurance contracts, such as:

• Auto liability coverage: Each state has minimum liability limits that must be purchased by all drivers. However, to help protect yourself from the unexpected, you may want to consider boosting your liability insurance coverage levels.
• Uninsured/underinsured motorist coverage: Similar to auto liability coverage, certain states require these coverages and set minimum coverage limits. By selecting larger coverage limits, you may be able to improve your coverage.
• Personal injury protection (PIP) coverage may be mandated or optional in “no-fault” You might be able to get higher coverage limits if you shop around.
• Medical payments coverage: This is usually an optional benefit. Up to a specific sum stated by your insurer, you may be able to choose your coverage limits.
• Coverage in its entirety: The real cash worth (or depreciated value) of your car is usually the comprehensive coverage maximum.
• Collision coverage: Your collision coverage limit is usually equal to the vehicle’s real cash worth.